Universal Credit change in circumstances for couples V1-JW-20161005

Introduction

Universal Credit (UC) operates in unexpected ways where there is a change in the claimant's household make-up. Couples splitting up or two separate households coming together as one, a change in income, can create a nightmare scenario for landlords, as there's every likelihood their rental income will be adversely affected by the change.

Why do changes in circumstances lead to unexpected outcomes?

The answer lies in the fact, UC is paid monthly, in arrears, and DWP has incorporated a "whole-month" approach to the various changes which can occur, during the life-time of a claim. This enables automation, avoids the need for DWP staff intervention, and the need to, for example, apportion rent liability increases, arising from the annual uprating of social landlord's rents or during a tenant's move to a larger and more expensive property. It also means that where the change results in more UC being payable, the rule can produce a bit of a windfall, for the tenant, as the change is effectively backdated to the start of the tenant's "benefit assessment period". The good news is, this, in turn, should help landlords secure payment of rent, at least in that month!

Example

To illustrate the point, let's say Eleanor (26) & John (28) are joint tenants of one of your homes. They're married, are claiming UC, as a couple, including an amount for housing costs. UC is paid on the 7th of each month, in arrears. Eleanor gives birth to a baby girl on the 5th of August 2014. John immediately alerts the DWP by phone of the change. By reporting the change immediately, the couple can expect an additional £274.58 in their UC award, effective from 7th July i.e. the start of their "assessment period". Under Housing Benefit rules, the change would kick in, the Monday following the birth. So UC is clearly more generous than HB in this respect.

However, where a change is to the disadvantage (less UC) of the tenant, it's also effective from the start of the claimant's "assessment period". The retrospective nature of this rule could almost certainly mean that landlords will find it more difficult to collect rent from the affected tenant's reduced Universal Credit award.

Couples splitting

Where couples split, even if it's only for a period of weeks or months, the change has to be reported. Treatment of couples who split depends on whether they reside in a live service area or a digital service area - see above. There is only one digital service area at the moment, i.e. London Borough of Sutton, but the number will be increased over time.

Couples splitting in live service areas

The rules are as follows for couples separating in live service areas:

When couples separate, the person reporting (phone, on-line, or Jobcentre) the separation first will be removed from the award of Universal Credit. If they wish to continue claiming they will be required to make a new claim.

The new claim will run on a monthly cycle starting from the date of claim. However, this claim can be backdated by a maximum of one month to fill the gap between the end of their last payment as a couple and the date their new claim begins. This backdating is not automatic; the claimant must request it, but if a request is made payment is guaranteed (that is, the decision maker has to allow the backdating and has no discretion to deny it). UC agents should provide appropriate advice about these backdating arrangements when the change is notified. If the change is reported but the new UC claim is not made within one month then backdating is no longer guaranteed but payment can still be made where there extenuating circumstances leading to the delay.

The award to the other former member of the couple will continue without the need for a new claim, subject to them confirming their circumstances. This is processed as a change of circumstance, with the claimant retaining their original assessment period.

Example

Tom and Sharon live in a live service area in our example Tom and Sharon are getting the two bedroom "housing costs" rate for each assessment period, ending on the last day of the month. They are paid UC as a couple for the period ended 31st March and he leaves on 20th April. His departure does not affect Sharon's housing element. So she will get her two-bed rate for the period ended 30th April. He makes a new claim on 23rd April so his first payment is due for the month ending 22nd May. However, he can make a backdated claim. If he does so, the whole of his UC entitlement (including the housing element) will be payable from 1st April. Payment will be made in accordance with his new monthly cycle.

Couples splitting in Full Service / Digital Service areas

New regulations came into force on the 26/11/14 which will apply in Full Service/Digital Service Areas. Where DWP is notified that a couple have separated, DWP will treat the claims by both single claimants as a change of circumstance. Each will retain the existing assessment period. There is no backdating rule as there will not be any discontinuity of payment.

Example

On the other hand if they live in a digital service area in our example, both Sharon and Tom retain the same assessment period, i.e. the 1st to the 31st of each month. UC entitlement is based upon the circumstances that pertain on the last day of the assessment period. So for the period ended 31st April Sharon gets the two bedroom LHA rate and Tom the one bedroom rate".

What happens when two separate households decide to come together and live as a common household?

We have used the two same fictitious guinea pigs (Tom and Sharon). This time around they decide to live together and claim Universal Credit jointly, rather than continue operating as two separate households.

Question - Tom is single and has his own PRS tenancy. This claim period is 15th to 14th and receives payment of his standard allowance plus housing element on 22nd of each month.

Sharon is a single parent, with her two kids aged 6 and 4. She has a tenancy with a Housing Association. Her claim period is 1st to 31st and receives payment on 7th.

Tom and Sharon decide they could live together and Tom moves into Sharon's HA home on the 10th. He reports this by phone to DWP.

So what happens to their respective claims and "housing costs"?

Couple formation - Live Service

Generally speaking, a couple can form where a UC claimant partners with a non-UC person (e.g. current HB recipient or working) or where two existing UC claimants become a couple.

In the first case, the addition of the partner is processed as a change of circumstances; the joint claimants retain the same assessment period; and receive their "housing costs".

Where two existing UC claimants join as a couple, it is up to the couple to choose which of their existing assessment periods to nominate for their new joint award. For example, they can choose to retain the assessment period that is closest to their joint circumstances (e.g. that registered to the address they are both to live at) or they can choose the assessment period with the closest assessment date to minimise the time before the next payment day.

Example

Both Sharon and Tom are receiving UC. Her assessment period ends on 31st of each month and his on the 14th. On 10th April he moves from his private rented flat into her housing association home and they decide to keep her assessment period. The housing element on the retained claim does not change and is payable, as usual, for the period ended 30th April. Only this time, payment includes provision for a couple!

If they opt to retain his assessment period they will receive the enhanced rate of UC, including a housing element paid at the level of her HA rent, for the period ended 14th April. She will also have received a payment of a month's rent for the period ended 31st March.

In Tom's case, he will receive no further UC "housing costs" payments for his previous tenancy, due to a combination of the "whole month rule" and the fact Universal Credit doesn't provide for any 4 weeks overlapping liability rule (or 2 homes payment). So his outgoing landlord will most likely lose out at least 4/6 weeks rent unless he's previously paid in advance.

It's worth noting, that if Tom had resided in a HA property, exactly the same potential rental loss could be experienced. In this respect, UC is much less generous than Housing Benefit.

Couple formation in Full Service / Digital Service areas

If Tom & Sharon resided in a digital service area such as the LB of Sutton where DWP is trialling the "digital" - all singing, all dancing IT system, DWP has now removed the need for them to choose which assessment period to use and instead will automatically select the assessment period with the closest assessment date. i.e. the more beneficial one!

Death

One exception to this rule, is where someone in the household dies; the households' UC continues, at the same rate, for that month and the two that follow the death; a form of transitional protection designed to prevent an immediate financial loss and unnecessary hardship.

Surprisingly, this transitional protection rule, does NOT apply where there's a single tenant.

Example

So for example, let's say you have a tenant, George (56) living on his own, whose UC is paid on the 17th of each month with a benefit assessment period of 10th to the 9th of each month. He dies on the 9th of August; the change comes into effect from the 10th of July (again, the start of his assessment period).

Poor George, won't be bothered, but his landlord can forget receiving payment of the housing element for that month, even where Alternative Payment Arrangements are in place. His liability to pay rent, for the month up to the date of death, has seemingly no bearing on Universal Credit, creating, in turn, the new concept of a "cradle to the month before the grave" approach for some unfortunate tenants!

Whilst it's easy to see the attraction of the "whole month" approach, in terms of its simplicity, in our view situations like the ones we have just described, ought to be covered by an "exception" to the normal rule.

Landlord & Investment Show
Martin Co
Envirovent
Landlord Broadband

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