Applying for direct housing payments under Universal Credit and deductions for arrears
This guide explains how and where a landlord can make a request for direct payments through the Universal Credit system and apply for deductions from the tenant's ongoing UC payments to recover outstanding rent arrears, but only where the tenant continues to live in the property to which the arrears relate. Please be aware that this system is always subject to change but details are accurate as of 30th August 2016.
Paying the Tenant is normal
As with the other elements that make up a UC payment, housing costs are normally paid direct to the Claimant/Tenant; not direct to the landlord. There are protections available for the landlord, e.g. where there are rent arrears. In these cases, landlords can request what is called a landlord managed payment, or an alternative payment arrangement, under which the housing costs element can then be paid to the landlord, if the request is approved.
Direct payments to Landlords are kept under review. DWP will fix a review date with a view to the tenant then returning to the former single monthly payment process. Reviews will be set for 3, 6, 9, 12, 15, 18 and 24 month periods. The idea also is that those Claimants who have direct payments of housing costs to their Landlords made will also receive personal budgeting support to build the Claimant's financial capability so that in time they can manage a normal single monthly payment.
IMPORTANT - when DWP review APAs they will decide whether the Claimant is capable of managing a single monthly payment. They will look at outcomes from the money advice offered and whether or not the Claimant himself/herself is financially capable to manage UC without the need for a direct payment for the rent.
Direct payment to Landlords - alternative payment arrangements
Alternative payment arrangements (i.e. direct payment to the landlord) allow for paying the housing costs element of UC as a landlord management payment direct to the landlord. They can be considered at any point during the claim. They may be identified at the outset at the Job Centre interview or during a claim. They can also be triggered as a result of information received from the Claimant, or the Claimant's representative, as well as the landlord.
Deductions to pay for outstanding arrears can also be applied for at the same time.
To safeguard the Claimant's home a landlord is able to notify DWP of a build up of rent arrears and ask for the housing costs element to be paid direct to him/her provided a rent arrears trigger has been reached. Annex A in the government guidance sets out the factors to be considered. There are two tiers. Tier 1 factors apply where it is highly likely/probably that there is a need for an APA. Tier 2 factors are cases where it is less likely/possible need for an APA.
The two most relevant factors for private landlords are Tier 2 - severe/multiple debt problems or that the tenant is currently in arrears/there is a threat of eviction/re-possession. Significantly this includes the case where the Claimant is currently in arrears with their rent in an amount equal to or more than two months of their rent. Alternatively, it can apply if the Claimant has continually underpaid their rent over a period of time and they have accrued arrears equal to an amount of one or more month's rent. It also applies if the Claimant has been evicted for rent arrears in the last 12 months or where the Claimant is subject to/threatened with eviction and/or repossession.
Tier 2 factors include a history of rent arrears. This applies where the Claimant is not in arrears but may have been within the last 12 months when subject to or threatened with eviction and/or repossession. However, DWP also consider in this case the fact that the Claimant may now be financially capable of managing their own financial affairs effectively.
APA should only be considered for those Claimants who cannot manage the single monthly payment and as a result there is a risk of financial harm to the Claimant and/or their family.
In deciding whether to make APA the process is Claimant Centric i.e. something that is considered and discussed with the Claimant. Applications are considered on an individual basis. DWP look at individual circumstances and characteristics. Factors looked at include:
- Is the Claimant managing to pay their bills on time, particularly their rent, and have they fallen into arrears in the past or are they currently in arrears?
- Does the Claimant think that he/she will be able to manage a monthly budget, taking account of their income and outgoings.
- If the Claimant is part of a couple are they used to managing their money together and will they be able to manage a single monthly payment of UC?
These factors are looked at against the Tier 1 and Tier 2 factors.
If an APA is put in place payment of UC housing cost element to the Landlord is the first priority in order to safeguard the Claimant's home. DWP can also see if a more frequent payment than a monthly payment is needed. If this happens where the Tenant pays rent the Landlord will also want to be paid and likewise if there is to be a split payment award between partners.
An e-mail facility is available, allowing Landlords, including private landlords, to make Alternative Payment Arrangement (APAs) applications, including requests for payment redirection, in respect of Universal Credit. APAs are also known as landlord managed payments.
If the Landlord is making the request this can be -
- By phoning Universal Credit on 0345 600 0723 requesting a rent arrears form or
- By email - private landlords use the UC47 (non secure) form. In the unlikely event of a private landlord having a secure email address there is a separate procedure but this will happen so rarely that we do not cover this any further in this Guide. Applications should then be submitted to the UC email address Universalcredithousing.firstname.lastname@example.org. Importantly, only UC47 forms should be sent to this email address. Additional documentation/evidence must not be sent to the email address.
By post - IMPORTANT - if you are applying by post you must use the Esecure version of UC47. You should not use the non secure version when applying by post. The Esecure version sets out much more information which is to be given by the Landlord than in the non secure version.
Email applications for direct payment
Universal Credit - e-mail APA application process applies to private Landlords!
Private Landlords need to be aware that there are 2 forms available to submit APA applications. The first, UC47 secure attached, is for landlords using the post; not use by email (unless in a very exceptional case a private landlord does have a secure Government email address)
If the landlord is applying by email then you must use the form (UC47 - Insecure) attached. This form only allows you to put in the most basic of information. DWP have said "this is to minimise the risk of sensitive claimant information being intercepted". DWP will phone you to obtain the necessary information and payment details.
the non secure email request must not be accompanied by supporting evidence/documents. These have to be sent separately by post. You also need to say which of the Tier 1/Tier 2 criteria you are relying on.
Evidence must also be provided before a direct payment for the Landlord can be made. This is as follows -
- Proof of rent arrears - this will show the current balance on the rent account including the amount of rent outstanding and the amount of rent due on each payment period. DWP will accept a rent book, rent statement or letter from the Landlord addressed to the Tenant on letter headed paper.
- A full break down of exactly how the rent arrears have been calculated, e.g. the period over which the arrears have accrued.
- A full break down of exactly how the rent amount is calculated/made up e.g. service charges, water rates and any other separate charges which are included with the rent.
- Additionally, you must provide the Landlord's contact details - the name and address of the Landlord, plus the Landlord's bank/building society account number and sort code for the account into which the payment has been made.
IMPORTANT - as indicated above, do not send the supporting evidence along with a non-secure email application. It will mean that the application is simply not processed. Instead you need to send the supporting evidence/documents separately by post. You should return it to FREEPOST DWP UNIVERSAL CREDIT LIVE SERVICE.
Vulnerability and direct payment to landlords
The intention is that those who cannot manage their own financial affairs or are unlikely to pay rent should be identified as being vulnerable at the outset and arrangements are then made which can include direct payment to the landlord. It can also be things like budgeting support.
DWP may take the decision in a particular case that direct payment to the landlord is not needed because a claimant can manage their own payments either with the help of an external advice agency who will assist with budgeting.
When can direct payments to landlords be made?
Eligibility for direct payment to landlords is assessed based on a combination of financial and vulnerability risk factors. There is a screening process at the outset. Measures short of direct payment to the landlord may be applied instead. This process will involve a number of stages:
- Referral - this includes self-referral, referrals by advisers such as the CAB and third parties such as landlords.
- Screening - only those claimants who have grounds for alternative payment arrangements will be considered and this will be done by decision makers; rather than automatically.
- Decisions - Final decisions on eligibility for payment exceptions will be taken by a member of DWP staff. They will be considered on a case by case basis with a range of vulnerability and financial risk criteria taken into account. One of the possible outcomes could be a decision to pay direct to the landlord.
- Review - The Government's intention is not to label any claimant as financially incapable and for that reason they say payment exceptions will be on a time-limited basis. DWP will look to put in place the appropriate support to ensure claimant's circumstances can be reviewed, moving them over time to a point where they can manage under normal arrangements.
There is no provision for the first payment of benefit to the landlord in all cases although, where this is appropriate, payment can be made direct to the landlord from the outset.
Existing direct payments
Even if a claimant has been in receipt of direct payment of housing benefits/LHA from the local authority to a private landlord this does not mean that direct payment of housing costs will be made to the landlord under Universal Credit. Each claim will be looked at individually.
Alternatively, the postal process is available. You must use the E-SECURE form attached when applying by post; not the non secure form. The postal address is -
DWP UNIVERSAL CREDIT LIVE SERVICE
When applying by post you can send the supporting documentation with the application. You must use the secure UC47 form when applying by post. Unlike emails, a postal application for an APA is regarded as a secure application.
Further information about direct payments
DWP has also provided a telephone number 0345 266 0041 to use if you encounter any difficulty implementing the new arrangements. This is an escalation line only intended to be used once you have exhausted other routes to deal with your query. Additionally, DWP state "please do not send anything other than APA request forms to the email inbox". All related queries should be made via the telephone number provided.
The DWP briefing note/update can be viewed here. This includes FAQS.
Deductions from Universal Benefit for arrears
As with the existing system Universal Credit will permit deductions to be made from benefit entitlement including for rent arrears. Landlords can apply for "Third Party" rent arrear deductions from tenants' Universal Credit, but only landlords with arrears relating to the property currently lived in by the tenant/claimant can claim these deductions. Deductions can be made at the rate of 20% of their Standard Allowance, although, in most cases, the deduction is likely to be capped at 10% or 15% because the tenant has other secondary debts, like Gas/Electricity, Council Tax, or Court Fines.
At the moment, Social Landlords make great use of "Third Party" rent arrears deductions from other means-tested benefits, like JSA, Income Support, ESA, Pension Credit. The current amount is £3.65 per week and is based on 5% of the tenant's JSA Personal Allowance, so the higher Universal Credit limit will create the prospect of having the "rent arrears" debt, cleared much quicker than now. Private landlords can apply as well.
The Standard Allowance for Universal Credit is the basic allowance for Universal Credit to cover living costs. It is calculated on a calendar monthly basis, and varies depending on the age & status of the claimant. Currently the amounts are:
- Single claimant, under 25 - £246.81 - deduction @ 10% = £24.65pcm or £49.30 @ 20%;
- Single Claimant, over 25 - £311.55 - deduction @ 10% = £31.15pcm or £62.30 @ 20%;
- Couple both 18-24 - £387.42 - deduction @ 10% = £38.70pcm or £ 77.40 @ 20%;
- Couple where one is 25 - £489.06 - deduction @10% = £48.90pcm or £97.80 @ 20%;
You can expect that the rent arrear will need to amount to at least 1 month's arrears, accrued at the current claimant's address. Payments are likely to stop as soon as the debt is cleared or where the tenant vacates that landlord's property. Private Landlords should welcome the move as "Third Party" deductions are not something they have made much use of in the past.
The application form for applying for "rent arrear" deductions is the same as the Alternative Payment Claim. The landlord completes the application and currently must send it to the Wolverhampton Office of DWP where it will be scanned and later determined by the new "housing costs" office, based in Bolton.
Deductions are prioritised and rent arrears along with mortgage arrears are in the first priority category. To qualify for deduction for arrears of rent the following conditions will have to be met:-
- The claimant must be receiving Universal Credit including an element of housing cost.
- The claimant must be in debt for rent payments (or service charges included in the claimant's rent).
- The claimant must still occupy the accommodation to which the debt relates.
- The claimant's earnings must be below the relevant minimum earnings disregard.
Where these conditions apply DWP may decide to deduct a monthly amount from the Universal Credit. This can then be paid to the landlord. The circumstances and cases are set out in guidance. Deductions must stop if the claimant's earned income reaches the applicable earnings disregard for three months. Overall for the total of all kinds of deductions there is a 40% maximum of the standard allowance, although in exceptional circumstances, deductions and direct payment to landlords can be made as a last resort to allow someone to remain in their home or to receive fuel and water supplies on an ongoing basis.
How do I challenge a failed APA request?
Landlords may want to challenge any Alternative Payment Arrangement (APA) request, which is:
- Refused unreasonably or without adequate reasons being given; or
- Payment of the "housing element" is NOT suspended, pending a decision, and continues to be paid to your tenant if the tenant does not pay the rent; or
- After the APA has been granted in favour of the landlord, further payments are mistakenly paid to your tenant and subsequently misused.
DWP's handling of APAs at times has been seriously flawed, mainly due to a combination of lengthy processing delays, documents disappearing, and basic errors made by staff. DWP staff were also failing to recognise that they could suspend payment of the "housing costs" so continued to make payments to tenants, some of whom had already misused payments, accruing substantial rent arrears in the process.
Landlords may use the DWP complaints procedure. Also, unlike under LHA, there is no right of appeal to an independent tribunal.