Rent paid in advance and deprivation

A debate is raging in our office so I’m hoping to put it to bed. If someone were to voluntarily pay a year’s rent in advance would they be caught by the deprivation rules if they went on not to claim the Housing Costs Element for that year.

The tariff income reduction would be much less than the HCE so it would, in effect, be a reduction in the award. however the reduction in tariff could be seen as an increase. I think the HCE would be payable if the rent in advance was a requirement by the landlord tot he tenant entering into the tenancy, but what if it’s a voluntary payment; does the liability still stand and would the HCE be payable at all where the rent liability is already met?

What do we think?

I didn’t think you could ‘choose’ not to have the HCE included - section 11 of the WRA 2012 says -

The calculation of an award of universal credit is to include an amount in respect of any liability of a claimant to make payments in respect of the accommodation they occupy as their home.

It’s not ‘may’ include

And he’s still liable to pay it - it’s just he’s already paid it

Hi Dan,

I would guess it would depend on the client’s state of mind when they paid the rent in advance e.g. did they intend to claim benefit when they made the payment, so that they knew that they would become entitled to or entitled to a higher amount of benefit? Additionally, were they in receipt of benefit when they made the payment and were aware that they would become entitled to a higher rate of benefit?

If they had no thought of claiming benefit when they made the advance annual rent payment or did not know that making such a payment would create or increase entitlement to benefit, then I do not see how they can be caught out by the notional capital rules.

Alternatively, if they knew there would be an increase in benefit entitlement, even if this was not the primary motive in making a payment of 12-months’ rent in advance, then they are caught by the notional capital rules.

I don’t see how you could claim Housing Costs Element as there is no rent liability – it has already been paid. Still, I have been wrong before and would be interested to see what others say.

I hope these musings are of some help.

Best regards

Chris

Suppose he could just avoid reporting any rent costs.

But then he would have just given away a large amount of money to an unknown entity, seemingly for no reason - which sounds like deprivation to me.

EDIT: I suppose there might be a version of this where an amount of money is handed over and in return they get use an occupation for a period of time, without a rent agreement etc. But that’s not the situation you’re describing in any event.

If the tariff income is less than the potential HCE payments it seems an irrational course of action for the claimant but I suppose they might have their reasons - to ensure the landlord can’t launch a s21 eviction for instance.

If the client links the reduction in capital to not claiming HCE then in my view they should not be caught by the notional income provision. For the provision to bite the deprivation has to be “for the purpose of securing entitlement to universal credit or to an increased amount of universal credit.” That last phrase - ” an increased amount of universal credit” - must in my view mean the full amount of UC (ie including any HCE) they would otherwise have got if they hadn’t deprived themselves of the capital, not an increased amount over what they were getting previously, assuming they weren’t getting HCE then. As UC is a unified benefit the impact on HCE of the combined deprivation/abstinence is the right way to look at it.

As for the claimant’s ongoing liability, I take Daphne’s point, but it seems to me the word liable in the WRA is used in a non-technical way, and I can’t see how someone who has already paid the rent can still be considered to be liable to make any payments for the period in question.

Daphne - 06 March 2023 02:36 PM

I didn’t think you could ‘choose’ not to have the HCE included - section 11 of the WRA 2012 says -

The calculation of an award of universal credit is to include an amount in respect of any liability of a claimant to make payments in respect of the accommodation they occupy as their home.

How’s that tempered by the operation of reg 38 UC etc (C&P)?

It’s not ‘may’ include

And he’s still liable to pay it - it’s just he’s already paid it

I was looking at schedule 2 and liability isn’t defined, one can be deemed to be liable, or not liable, but bare liability to pay a landlord doesn’t seem to be covered. Is he still liable once it’s paid? That goes to the heart of this.

a liability is a contractual obligation - paying it fufils the obligation, but doesn’t remove the liability.

Paying your rent in advance doesnt remove the contractual obligation /liability.
many privatle rented accommodation will ask for rent in advance - sometimes a much as 6 months up front, especially if the property is in a tourist-y area or the tenant has little income

In HB there was quite a well known case where customer had lived in privately rented accommodation for years.
He was made redundant and needed to claim HB

He paid 6 months rent as soon as he got his redundancy - his reasons for doing so were that he was bad with managing money and was worried he wouldn’t budget - paying the 6 months up front gave him the breathing space to find another job without having to worry about paying his rent each month.
The 6 months rent payment took his capital below £16k

That wasn’t treated as deprivation and indeed he got the 13 week protection paid…

You’d really need to know the details of why the payment was made at a particular time -  but no black and white answer as to whether its deprivation or not

I dealt with a case when I was working in UC at Bath Jobcentre where the claimant in a very expensive rental area paid several thousand pounds of rent in advance and there was no question of deprivation being looked at.

C Browne - 06 March 2023 02:43 PM

Hi Dan,

I would guess it would depend on the client’s state of mind when they paid the rent in advance e.g. did they intend to claim benefit when they made the payment, so that they knew that they would become entitled to or entitled to a higher amount of benefit? Additionally, were they in receipt of benefit when they made the payment and were aware that they would become entitled to a higher rate of benefit?

If they had no thought of claiming benefit when they made the advance annual rent payment or did not know that making such a payment would create or increase entitlement to benefit, then I do not see how they can be caught out by the notional capital rules.

Alternatively, if they knew there would be an increase in benefit entitlement, even if this was not the primary motive in making a payment of 12-months’ rent in advance, then they are caught by the notional capital rules.

I don’t see how you could claim Housing Costs Element as there is no rent liability – it has already been paid. Still, I have been wrong before and would be interested to see what others say.

I hope these musings are of some help.

Best regards

Chris

I think we need clarity on intent as intent is surely the starting point. You cannot in any sense deprive yourself of an asset for benefit purposes if you had no idea about what benefits to claim; the impact on those benefits etc. at the time of the deprivation. Same as you can’t deprive yourself of capital if you didn’t know the capital limit.

Payment of housing costs (in UC and HB) for a period of liability which has already been paid must be a fairly routine occurrence.  Particularly true at the start of tenancies and benefit claims where people will frequently have to find the funds from somewhere to start paying rent before the benefit bureaucracy clanks into gear!  It’s the existence of a *liability* which is key.