Universal Credit – here comes the homelessness By Giles Peaker

Social landlords have been panicking about Universal Credit for a bit, particularly those with experience in the pilot areas. But private landlords have been panicking too, and their panic takes a rather blunter and more immediately brutal form.

GAP Property, a large landlord in the Grimsby area, has been staring at the introduction of Universal Credit in their area on 13 December 2017, and they don’t like what they see. In a letter apparently sent to all their tenants (many of whom apparently now receive LHA), GAP issued dire warnings and served everyone with a section 21 notice. The full letter is at the end of this post.

The key issue, of course, is the 6 week delay in payment on any new Universal Credit claim. That is not – just in case you have had your head in the sand – payment in arrears for 6 weeks, it is 6 weeks with no payment at all.

GAP’s letter, from mid November, says (in part)

Given that the whole thesis of the letter is ‘you won’t have any money, and you’ll have to pay your rent, so figure it out now, because we are gearing up to evict you if there are any arrears’, it is a bit of a stretch to say it is ‘not intended to cause alarm’. It is. And it certainly will.

But, while GAP’s letter could certainly have been better worded (and their strategy of serving s.21 notices is probably not great in practice, for reasons I’ll come back to), it would be foolish to simply say ‘bad landlord’ and ignore the very real and serious problem that this landlord and many others are facing.

Realistically,  landlords, social or private, could not sustain a sudden escalation of rent arrears to about 6 weeks worth across a large section of their tenant base. There will always be a degree of individual issues, and a relatively consistent averaged-out level of arrears, but the hit of a sudden escalation of arrears across a large part of their tenant base is a different matter entirely.

(And before anyone starts wittering on about ‘well they should budget’, this is, by definition, almost entirely about people on low or no income. How the hell do you budget for savings to cover six weeks rent and living costs?)

So, whether or not you consider the letter to be well judged (it isn’t, it really really isn’t), it is to a degree a rational response to a situation that will not be sustainable. And of course, private landlords are not constricted by the rent arrears pre-action protocol, which will stifle social landlords from taking immediate possession steps within or due to the six week UC delay.

Let us be blunt. This is a direct consequence of the 6 week delay in Universal Credit payment from claim. There will be a lot more of this. There will also be many more private landlords refusing to let to prospective tenants on Universal Credit,

And yes, there will be a rise in PRS evictions in UC areas (I don’t know if anyone has stats for the pilot areas? Difficult as they don’t match court regions for possession claims). There will be a rise in homelessness from PRS tenancies, already the single largest cause in the rising homeless figures. Councils’ homeless prevention strategies will be blown out of the water.

Now, on to what this approach means in law.

Since this letter got into other people’s hands, I’ve been asked a few times ‘is this legal’? The simple answer is yes.

But there are complications.

In general, if the fixed term of the tenancy has more than two months left to run, the section 21 notice cannot expire before the end of the fixed term. So section 21 notices to a large number of tenants cannot be simply standardised – they have to be tailored to the facts of each tenancy.

And then for any tenancy that started on or after 1 October 2015 (which one suspects that a lot of GAP’s will be):

If the tenancy is a first tenancy and within its first 4 months, the s.21 notice will not be valid. (and of course still can’t expire before the end of any fixed term).

The section 21 notice expires 6 months after the date of service (so there is at best a four month window to use it for possession proceedings).  On this timetable, GAP could only start proceedings on the s.21 notices served now between mid January and mid May 2018.

But then Universal Credit claims will not be coming in one swift wedge in December in that area, but continually from then onwards… So, if GAP (and any other landlord adopting this approach), want to have a valid section 21 notice continually available, they will have to serve a fresh section 21 on all their tenants every four months. (To have a new section 21 becoming valid in mid May 2018, it would have to be served in mid March 2018, and so onwards). And that is assuming no new or renewal tenancies granted, just continuous statutory periodic tenancies.

It is also assuming, of course, that the landlord has complied with the other requirements for a valid s.21 ( that is serving EPC certificate, gas safety certificate if a gas supply, the DCLG ‘How to Rent’ Booklet – of the latest edition at the start of the tenancy – and deposit scheme compliance).  Many don’t manage this.

The practicalities and admin will be a hefty burden, with much to get wrong. Yet it is possible.

We thought the Deregulation Act had brought a close to the ‘Sword of Damocles’ section 21 notice – as it used to be served with the tenancy agreement at the start – but this would be the new version, with immediate, undefendable possession proceedings facing tenants at the slightest hint of rent arrears. And it is wholly due to the ludicrous decision to delay payment of Universal Credit for 6 weeks.

Just watch the homeless figures rise….

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