Housing Benefit: Victory for Landlords in Rent Arrears Case

Doncaster v Coventry City Council, First Tier Tribunal 032/09/00932, 5 October 2009

Approved in Upper Tribunal ST v SCC (CH) [2019] UKUT 33 (AAC)

This case will also apply to the question of 8 weeks or more arrears for Universal Credit.

The Guild of Residential Landlords has won a critical case that will benefit all landlords throughout England and Wales, where the tenant becomes in arrears. It applies where the landlord requests direct payment of housing benefit or Universal Credit.

Since we wrote this article, the Upper Tribunal approved the case, and the DWP amended the guidance. This is fantastic news, as it should avoid the need for any further appeals on this point.

The circular (HB/CTB A26/2009) providing the amendment is available here.

The local authority guidance has been changed due to this case.

Background

Regulation 95 Housing Benefit Regulations provides that where a tenant is in arrears of an amount equivalent to 8 weeks or more of the amount he is liable to pay his landlord as rent, payment shall be made to the landlord.

A landlord must notify the local authority that the tenant is eight weeks or more in arrears before Regulation 95 applies. [Social Security Commissioner Decision CH 0180 2006 - M Mark at para 24]

Two reasons are typically cited for refusing to pay direct: 

(a) because the local authority pay housing benefit in arrears, they, therefore, regard all rents to be payable in arrears, and 

(b) more commonly, the local authority refers the landlord to the DWP guidance on local housing allowance, where in a note above 6.86 - 6.89, it states, "Note: DWP takes the view that a person cannot be in rent arrears in respect of a period that has not yet been served"

The Guild has always maintained that this statement is wrong and that customary rent laws apply to housing benefit. The law of when rent is due is as follows:

• Rent is due in the morning appointed for payment, but it is not in arrear until after midnight [Dibble v Bowater (1853) 2 E. &B. 564]. 
• If rent is payable in advance, it will only become payable if the term has continued until the end of the rent day. [Re Aspinall, Aspinall v Aspinall [1961] Ch. 526.] 
• Rent paid on the morning of the rent day is a good discharge of the tenant's obligation to pay. [Clun's Case (1613) 10 Co.Rep. 127a.] 
• Rent may lawfully be made payable on a Sunday and, if not paid, will be in arrear by midnight of that day.[Child v Edwards [1909] 2 K.B. 753] But rent due upon a bank holiday will not be payable until the following day. [Banking and Financial Dealings Act 1971, s.1.]

Background

The tenant's rent was payable in advance on the 16th day of every month. On 16 August 2008, the tenant failed to pay rent to the landlord. On 16 September 2008, the tenant again could not pay the rent.

On 17 September 2008, the landlord made a written request to Coventry CC for payments to be made direct, citing that the tenant was eight weeks or more in arrears and, therefore, regulation 95 applied. The landlord enclosed a copy of the tenancy agreement showing the rent was payable in advance and also sent a copy of the rent schedule showing the two missed payments.

On 25 September 2008, Coventry CC replied that direct payments would not be made to the landlord because "according to our records, your tenant is not eight weeks in arrears with rent payments". Verbally, Coventry CC confirmed to the landlord that the reason for the decision on 25 September 2008 was because they believed that a tenant cannot be in arrears until the period for the rent has passed. Therefore, two whole months must pass before they can make payment.

The local authority continued to pay the tenant until 22 October 2008, when a new request for direct payment was made by the landlord, for which payment was made. Therefore, the amount in question was four weeks of rent at £98.02 per week, covering 17 September to 12 October 2008.

The landlord requested a written statement of reasons, then a review, and finally, an appeal was made.

The grounds for appeal were that at the time of the request on 17 September 2008, the tenant was the equivalent of 8 weeks in arrears because the rent was payable in advance.

On 5 May 2009, after many letters from the landlord, the local authority finally admitted that they should have paid the landlord. Still, it refused to pay because a local authority cannot pay benefits twice, even if the first payment was made incorrectly. Commissioner Jacobs confirmed this in CH 3629/2006. (We accepted that payment could not be made to the landlord, but the landlord would be entitled to "compensation" for an equal amount to the rent sent in error, as was suggested by Commissioner Jacobs in the same case. 

Held

The Housing Benefit Appeal was allowed, and the decision not to pay the landlord directly on 25 September 2008 by Coventry CC was set aside.

Judgement of CJ Jones

"The appellant is entitled to payment of rent in respect of ... from 17 September 2008 to 12 October 2008 totalling £392.32 since the tenant was in arrears of 8 weeks with his rent as at the decision date.

Whilst the appellant has an entitlement to be paid, because of the off-setting provisions contained in regulation 98 of the Housing Benefit Regulations 2006, no actual payment can be made. (Observations of Mr Commissioner Jacobs in CH 3629/2006 considered and applied).

This case has been beset with errors on behalf of the local authority recognised by the local authority in their letter of 5 May 2009 to the appellant. Compensation is due to the appellant and should be paid now rather than the appellant pursuing a protracted application to the Ombudsman. Decision 3629/2006 refers explicitly to the issue of compensation.

In making this decision, I have considered the Housing Benefit Local Housing Allowance Guidance Manual as amended in March 2008, particularly the note at the foot of 6.86 - 6.89 that rent cannot be in arrear in respect of a period that has not been served.

I'm afraid I have to disagree with that view. Rent is in arrears once the contractual date for payment has passed, irrespective of whether rent is due in advance or arrears. Regulation, 95 of the 2006 Regulations, refers to a liability to pay rent, and the liability, in this case, is to pay rent in advance." [CJ Jones]

A copy of the judgement is available here.