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Duty to use housing element for housing costs?

Andrew Hamilton
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Although relating to a debt case, this query likely covers possible benefit case law. I seem to remember it being discussed before but cannot find the link.

We have a client getting UC with housing element but not paying their rent due to other expenditure. We recently applied for Breathing Space, this is a 60-day debt moratorium done through the Insolvency Service for those unfamiliar with it, which included rent arrears. The landlord has raised an objection because the client is not using their housing element entitlement in the ‘correct’ manner.

Is there any case law to indicate whether a client has a legal duty or not to use benefit identified for rent for this purpose and the consequences of not doing so? Any thoughts appreciated.

HB Anorak
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From memory there is a case involving Hammersmith Council where it was found not to be fraud (will try to find the reference) but it’s obviously a very good way of getting yourself evicted

Prisca
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Agree with Mr barker - not paying the Housing element over to the landlord is a bit shortsighted - a DHP cannot “duplicate” payments already made

if I was the landlord id ask for a managed payment of the housing element to stop the arrears getting any worse.

Andrew Hamilton
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Thanks for your replies, the client is aware of this and has already been served with a (valid) s21 notice.

The issue we have is we need to make a decision whether we cancel the Breathing Space application early based on the objection or not, if the latter the landlord can then appeal our decision to the County Court (although unlikely to actually happen due to the time it would take). What we are trying to decide is whether the objection they have raised is legally sound.

Elliot Kent
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I don’t really understand what the landlord is trying to argue here. As I understand it, the only valid grounds to challenge the breathing space are (1) that the breathing space is causing unfair prejudice to the creditor, (2) the debtor doesn’t meet the criteria for a breathing space (3) the debt itself should be excluded (i.e. due to fraud) and (4) the debtor has the funds to pay the debts. (2) and (4) don’t seem relevant here.

Let us say for argument’s sake that the landlord is right that the tenant owes a legal duty to pay the funds that they have received from the DWP as the HCE over to the landlord and they are in breach of that duty.

This doesn’t make the rental liability an excluded debt. It would have been incurred regardless. The debtor’s “fraud” as such is only in failing to deploy the funds paid by the DWP correctly but that is a matter between them and the DWP. It doesn’t change the nature of the debt owed by the tenant to the landlord which is simply that it is due under a contract.

(To look at it another way - suppose a charity had paid the tenant some money towards their rent and they fraudulently failed to pay it onto the landlord. The landlord then gets a CCJ for the unpaid rent and the charity gets a CCJ for the misappropriated funds. The debt owed to the charity could arguably be an excluded debt because the tenant has incurred that debt as a result of their fraudulent representation that they were going to spend it on rent. The debt owed to the landlord would not be an excluded debt because its just an ordinary contractual liability.)

The argument from unfair prejudice seems weaker still. The landlord I suppose is trying to say that the fact that the tenant has breached their duties to the DWP elevates the significance of the debt, because they are not only in breach of their private contractual duties but they are also a bad citizen because they have misappropriated public funds. But what does that have to do with the breathing space itself causing undue prejudice? Surely the point is that the debt would be owed regardless and the question is just whether preventing enforcement of it for a time is prejudicial to the creditor’s interests in some way which goes beyond the norm.

Speaking as a non-debt adviser of course so I am sure there are others better placed to comment.

nevip
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On the narrow point of whether there is a legal duty on the recipient to use his Housing payments to pay his rent, then see Director of Public Prosecution v Huskinson (Queens Bench Division) 1988.  But it needs to be borne in mind that this was a case involving Housing Benefit payments.  The broad answer in Huskinson was that there was not.

The case raises some interesting points, some of which are specific to the HB regulations and concern, among other things, the powers of LA’s to withhold payments (one would need to look at the UC reg’s for a comparative analysis) as well as addressing the narrower point highlighted above.

I offer no comment on either the debt issues raised in this post or the criminal aspects of Huskinson.  I’m also mindful of the fact that Huskinson is now 33 years old and might have been overtaken.

Gareth Morgan
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As has been said many times, although the separate elements in the needs assessments for UC are used to assess the maximum benefit, once the award has been calculated there is no assignment of any of the amount payable to a particular purpose.  UC is just UC, it’s not £x for food, £Y for children or £Z for rent.

Ianb
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Gareth Morgan - 17 November 2021 04:28 PM

As has been said many times, although the separate elements in the needs assessments for UC are used to assess the maximum benefit, once the award has been calculated there is no assignment of any of the amount payable to a particular purpose.  UC is just UC, it’s not £x for food, £Y for children or £Z for rent.

Absolutely. If claimant has a maximum entitlement of X but only gets Y due to other income/deductions etc there would be no way of saying which bits included in the calculation of X have been missed off the payment. As you say, its just a UC payment.

HB Anorak
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A smoothie, not a fruit salad!
(c) Housing Systems

Catblack
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Prisca - 17 November 2021 01:28 PM

Agree with Mr barker - not paying the Housing element over to the landlord is a bit shortsighted - a DHP cannot “duplicate” payments already made

if I was the landlord id ask for a managed payment of the housing element to stop the arrears getting any worse.

I have been looking at the DHP guidance recently and it mentions duplication in respect to payments of HB but not UC - I would argue that payment of UC is a single lump some - a smoothie not a fruit salad (great analogy).

I would consider then that if a claimant is iro UC and then can genuinely demonstrate financial hardship and a shortfall, they could be awarded a DHP up to the HC element, regardless of their HC entitlement.

Thoughts?

Timothy Seaside
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Catblack - 19 November 2021 09:06 AM

I have been looking at the DHP guidance recently and it mentions duplication in respect to payments of HB but not UC - I would argue that payment of UC is a single lump some - a smoothie not a fruit salad (great analogy).

I would consider then that if a claimant is iro UC and then can genuinely demonstrate financial hardship and a shortfall, they could be awarded a DHP up to the HC element, regardless of their HC entitlement.

Thoughts?

Yes, I think you are absolutely correct. This is a fundamental difference between a DHP in HB and UC. Reg 4 of the DFA Regs is pretty clear.

Edit: This aplies to weekly (in the case of HB) or monthly (in the case of UC) periodic DHP payments - which are likely to be rent top-ups - but not to other DHP awards.

 

[ Edited: 19 Nov 2021 at 10:49 am by Timothy Seaside ]
Gareth Morgan
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This would seem to be a natural consequence of the fact that there isn’t a specific housing ‘bit’ in the UC payment.  I like the fruit metaphor but it does seem a bit too nice and healthy for UC.  Maybe clods and sludge?

HB Anorak
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Still not convinced that the weekly/monthly limits in the DFA Regs don’t apply to one-off lump DHPs conjured out of thin air.  I think the Gargett case (and you need to read both the original JR and Court of Appeal decisions) is very clear on this: every DHP must be calculated by reference to a past or current weekly/monthly shortfall referred to in Reg 4, qualified by the use of the word “further” in Reg 2, even if the DHP is paid as a lump sum.  But I do agree that it is not so easy to identify the shortfall in a UC smoothie - all you need is (1) max UC includes a housing element (some housing berries went in the jug at the start) and (2) there is entitlement to a least 1p a month (there is at least one drop of smoothie left in the jug).  I am not sure this allows a DHP in a case where the claimant has no income, receives full UC and the housing element is not restricted in any way: it defies the commentary on “further assistance” in Gargett.  See, for example, para 25 in the Court of Appeal case.

Not that anything bad is going to happen if a council does make a Gargett-busting DHP.  Individual decisions are not audited in the same way that HB itself is audited.  Not using the budget is arguably a greater sin as there is an element of “use it or lose it” when allocations are reviewed from time to time.

Timothy Seaside
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I should clarify; when I said periodic DHP payments, I meant in the Gargett sense - I haven’t read it since it was decided but my memory is that Gargett makes the point that Reg 4 applies to payments that are calculated based on sums that were due periodically - so that includes rent arrears. Having said that, Gargett would appear to be at odds with the guidance which specifically contemplates using a DHP for rent in advance - which surely must be calculated in the same way as rent arrears? So it’s okay to use a DHP to pay full rent that isn’t due yet but will be covered by HB, but it’s not okay to pay full rent that is due and was covered by HB? I think Gargett was a fudge, and the guidance has had to do a lot of fudging to get around it:-
“4.4. If you decide that there is no way to avoid a duplication of the payment and the claimant is entitled to a DHP in respect of housing costs (specifically a rent payment in advance), then you may still award a DHP.” - oh, that’s okay then.

I don’t think Gargett means that a lump sum for other things (e.g. moving costs) is limited in the same way.

I fully agree that Gargett doesn’t really restrict how a local authority uses DHPs - it’s only really useful to help the LA justify NOT using a DHP for certain things.