Universal Credit and the potential legal fallout

Universal Credit (“UC”) is expected to be implemented throughout the UK by 2017. However, there is a great difference in opinion over whether this will be beneficial, or whether it will create more problems than it solves for social housing landlords.

Under the current system, social housing landlords receive rent payments directly from local authorities for tenants who are in receipt of housing benefits. As a result, payments are always made on time and disputes between landlords and tenants over arrears are relatively low, if not non-existent. However, the Department for Work and Pensions (“DWP”) wants to change this so that claimants for welfare benefits will be paid a lump sum each month, from which they will have to pay their social housing rent. It is expected that UC will be fully in force throughout the UK by 2017.

It is widely accepted that the current welfare system does need updating as it is seen as too complex following a number of different reforms, making it hard to navigate. Iain Duncan Smith and his colleagues at the DWP think they have the answer to this with the introduction of UC. However, there is a degree of uncertainty over the scheme, which has only been furthered by the experience of private sector landlords. They have found that of their tenants who are in receipt of UC, over 60% were in arrears, and the DWP has been in no rush to address these problems, taking 5 weeks to respond in most cases.

This is a problem that is expected to be mirrored in the social housing market, and it represents the most significant legal problem. If tenants who receive UC do not pay their landlord rent, either because of delays with DWP or because the tenant uses their UC for other purposes, the amount of disputes concerning rent arrears will inevitably increase. The question then arises: what is the recourse for the landlords? There is simply no benefit in bringing legal proceedings to enforce the arrears against the tenant because they have no assets. Consequently, these disputes will fall at the feet of the DWP that, on the evidence from the private sector, is slow in dealing with these disputes. As a result, there is a significant risk in the number of evictions increasing.

Another major issue for social housing landlords associated with the introduction of UC is the amount of tenants which they have who will receive it. There is a major question mark over whether social landlords have the administrative systems in place to deal with the full transmission by 2017. A report commissioned by “Housing Partners” found that social landlords do not have access to the data they need to manage the introduction of UC, which may put them at a huge financial risk.

read more: http://www.24dash.com/news/universal_credit/2015-10-09-Universal-Credit-and-the-potential-legal-fallout?

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