Tenant being charged 50% rent

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  • #37914
    jamesd
    Participant

    I have a case where the Landlord of a property has set the rent at £395 pcm, but has given the tenant the first month at half price (in order to attract new tenants). Therefore i have set the initial LHA assessment at £197.50 (50% of rent).

    My question is whether i can then change the LHA assessment to £395 from the start of the second month- or is the intial assessment stuck at £197.50 (as is the case with normal rental increases)?? This obviously restrict the maximum rent we can pay to 50% for the first year.

    If so then I cannot believe that this is intention of the regulations.

    #106693
    Anonymous
    Guest

    James

    We have had exactly the same situation, where the tenancy agreement shows a rent of £400 pcm but for the first month the amount charged was £275, this being a marketing tactic to encourage new tenants.

    We have asked the DWP for advice and below is the response received. It certainly suggests that the outcome we are left with was not an intention of the regulations.

    ” As you know in calculating the maximum rent, the cap rent is based on the amount the customer is liable to pay. Therefore, I do not think that it would be appropriate for you to determine the customer’s maximum rent based on the full contractual rent value of £400 pcm as this would result in overpayment. On the other hand if you used the discounted rent of £275 pcm in determining the maximum rent, it would then mean that the customer’s HB will be based on this cap rent until the next anniversary unless there is a relevant change necessitating the re-determination of a new maximum rent. Or where the customer has a break in claim for at least one week which will trigger the recalculation of a new maximum rent.

    However if we want to find a solution here, you might be able to use HB Reg 80. HB Reg 80(2)(b) provides for the calculation of rent payable at monthly intervals and is intended to turn the monthly figure into the weekly one. This is done by adding up the claimant’s liability and dividing by the number of months it is due for, multiplying by 12 to get an annual figure and then dividing by 52 to get a weekly figure. I think it could be used in this way in the case you have described in your email below . The relevant LA takes total amount due (in this case 5 months at £400 and one at £275 which comes to £2275) and divides by 6 (This gives about £379). Then the LA multiplies by 12 (£4550) and divides by 52 to give a weekly figure of £87.50.

    If the claimant’s rent were £400 for the entire 6 months his weekly rent would be £92.31 so he faces a slight shortfall for the months where he pays £400 but this balances out the excess he would get in the first month where the weekly rent would work out as £63.46.

    At present I do not think that there is any regulation which will allow you to pay the customer at the full value of the contractual rent of £400 pcm in the first month which has been discounted to £275pcm . I will also suggest that you discuss the implication of accepting the one month rental discount with the customer at the point of application. Perhaps clarifying that the only way to get a new maximum rent determination will either be where a relevant change occurs or there is a break in claim for up to one week.

    Having said this, we will be looking further into this scenario to see if there is anything else that we could do with regards to our policy.

    I am sorry if my reply does not seem to be quite positive.”

    #106695
    jamesd
    Participant

    Simon,

    Thanks very much for the response. We seem to be getting a few of these, so i think they’ll possible become almost common place.

    It will certainly be fun trying to explain this to some of our customers!

    And the way the DWP suggest we treat it is relying on the customer being on benefit for the whole year, based on the same circumstances. Otherwise we’ll be overpaying.

    Regards

    #106743
    peterdelamothe
    Keymaster

    If the person is liable to pay £400 then I think that is the figure you have to use. I dont see how this would lead to an overpayment at all. If someone has a liability but then does not pay the rent, you would not recalculate it – the Huskinson caselaw is clear on this.

    The DWP advice; my guess is that they struggled with this because they would not want to be seen as agreeing to pay more in HB than the amount the claimant is paying.

    #106746
    jamesd
    Participant

    The overpayment would occur if we totalled the first 6 months rent (one at reduced rent, and five at full rent) and then averaged them. This would mean if the customer moved out after two months (for example) then we have actually paid more than they have been charged.

    The Tenancy Agreement states as follows “£395 per calendar month, first months half price”. Are you saying Peter that i should be paying £395 from the start?

    #106922
    peterdelamothe
    Keymaster

    I dont see that the HB scheme has the flexibility to lawfully take this arrangement into account. It would make sense just to pay on the half rent then increase to the full rent ….but technically this is a rent increase that is not allowed until the anniversary date. If your auditor picked it up, they could take a very dim view. If there was an overpayment then I think it would be official error. If the DWP were correct on using the average then why could this not apply to any rent increase? Trying to fit a reg to an awkward situation does not exactly help with consistency.

    I admit I dont have an answer …apart from getting the landlord to work out an average rent for the contract to have into account the reduction in future.

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