By Citizens Advice Staffordshire North & Stoke on Trent

The Issue

Ineligible service charges are those not covered by Housing Benefit.  Previously, supported and temporary accommodation providers could apply to have these paid from a customer’s legacy benefit where a resident was at risk of arrears or, already in arrears.  This system was not perfect and was subject to delays but, it did mean that the person would not be evicted due to service charge arrears, it avoided the need for cash handling and, it allowed focus on support.

Supported and Temporary Housing providers have been told by the DWP that UC regulations do not allow payments to be made from a person’s UC for these ineligible charges.

“Arrears of service charges can be requested from Universal Credit via a Third Party Deduction (if customer is still living in the property). Unlike legacy benefits there is currently no way of service charges (non-arrears) being deducted from UC.“  (Local DWP Homelessness Forum update August 2019)

This mistaken understanding of the legislation will undoubtedly increase the level of evictions for people who are experiencing multiple and complex needs and who are already socially marginalised.  In January 2019 the UK Government’s official statistics found that the number of rough sleepers had increased by more than 250% since 2010.  These numbers will increase as more people are moved on to UC.

The Legislation

UC, PIP, JSA, and ESA (Claims and Payments) Regulations 2013, Schedule 6, paragraph 7

The legislation as it is, allows for deductions where the customer is in debt for any service charge, eligible or not.  It applies to residents who are in debt for rent payments and or serviced charges which are paid with or as part of their rent.  They must already have an award of UC either with the housing costs element or with an award of HB (because they occupy exempt accommodation).

Paragraph 7 defines service charges as:

“any items in a charge for services in respect of the accommodation occupied by the claimant which would not fall to be treated as service charges under the Universal Credit Regulations.”

Sch.6, para.7 assumes that the person has rent arrears but is paying their current liability.  The level of debt is not specified so this need not wait until 2 months of arrears has accumulated.

The maximum amount deducted for these arrears cannot be less than 10% or more than 20% of the claimant’s UC standard allowance.

In light of the above, Freedom of Information Request VTR 5655 confirms that the DWP are able to review and amend the ‘2 month arrears’ trigger point for housing costs to be paid to the landlord without having to amend the legislation:

“We have set it at that rate because that is when landlords can automatically commence eviction proceedings.  If we identify that this trigger is not protecting claimants from being made homeless, which is what it is set up to do, then we will review the policy and amend the trigger if necessary.”

https://www.whatdotheyknow.com/request/187692/response/478348/attach/3/wdtk%205655%20final.pdf

The Universal Credit (Claims & Payments) Regulations, reg.58 (a) in relation to Third Parties, allow for payment to another person on the claimant’s behalf if, “it appears to the Secretary of State necessary to protect the interests of the claimant”.

*Debt is not referred to and neither is any amount to be paid specified as reg.58 is about a payment being made to another person, and this is what makes Alternative Payment Arrangements (APAs) possible.  

The DWP is choosing to use this power for managed payments of eligible rent.  If the DWP has recognised a category of person for whom APAs are “necessary” (residents who for some compelling reason will be unlikely to make the payment), it would follow that if it is “necessary” for eligible service charges, why would it not also be “necessary” for the ineligible service charges?  Again there is no need to wait until significant arrears have accrued and the resident can make the request or give a third party consent to do so on their behalf. 

Gov.uk: Universal Credit and rented housing: guide for landlords

2.8 Alternative Payment Arrangements

“The landlord or claimant can apply for an Alternative Payment Arrangement (APA) Managed Payment to Landlord (MPTL) at any time, which will be considered on a case by case basis.”

So what can we do?

Various approaches have been discussed amongst specialist Welfare Benefit advisors and Supported Housing providers nationally as to how we can tackle this issue.  After some discussion and research, the Welfare Benefits specialist team at CASNS has suggested the following:

Apply for an APA managed payment under Regulation 58 and/or Third Party Deduction under Schedule 6 paras.7

• The resident or the landlord can do this at any time by completing a UC47 (see link below).  You can complete the form online and submit it or you can download the completed form and send it by post to the address on the UC47 form.

https://www.gov.uk/government/publications/application-for-third-party-deductions-universal-credit

• The form does not easily lend itself to the legislation so you may want to attach a letter with details of the relevant legislation and reasons why it would be in the interests of the claimant to make these payments:

For residents in arrears but who are now paying their ongoing service charges, Sch.6 para 7 can be used to allow deductions for ineligible service charges. 

For residents in arrears and who are not paying their ongoing service charges, Reg. 58 can be used giving reasons why it would be in the best interests of the claimant.

Once the resident is in arrears of 2 months or more, the landlord can automatically make an application for a TPD for Rent & Service charges (including ineligible service charges).  But remember the landlord or the claimant can apply for an APA Managed Payment to Landlord (MPTL) at any time, and should be considered on a case by case basis.

*Please note that there are no appeal rights against a decision not to make these payments.  The decision can be reviewed with new information, or a complaint can be made if you think the DWP is fettering its discretionary powers.  However the only legal challenge you can make is by Judicial Review.  If you are refused a request for payments under these regulations you should seek specialist advice from your local CAB or Law Centre.

https://cpag.org.uk/welfare-rights/judicial-review

https://www.citizensadvice.org.uk/

https://www.lawcentres.org.uk/

Impact on the resident’s UC monthly payment

The maximum a person can have deducted from their UC standard allowance is 30%, however further deductions can be made for rent and service charges and, fuel costs if it is in the best interests of the claimant even though the deduction would exceed the maximum amount.

If these payments are allowed, they will also be subject to the individual’s UC assessment period and, for those who fall into Sch.6, para.7, deductions for arrears will only usually be somewhere between 10-20% of the person’s UC standard allowance, depending on whether other deductions are being taken which will not cover the whole of the actual cost.

For example:

John is aged 22.  His ineligible service charges are £42.13 a week full board (£182.56pcm).  His UC standard allowance is £251.77pcm before any other deductions, e.g., recovery of an advance payment.  The maximum deduction of 20% of his standard allowance is £50.35pcm, leaving a shortfall of £132.21pcm for his service charges.

Lisa is aged 36.  Her ineligible service charges are £42.13 a week full board (£182.56pcm).  Her UC standard allowance is £317.82pcm before any other deductions, e.g., recovery of an advance payment.  The maximum deduction of 20% of her standard allowance is £63.56pcm, leaving a shortfall of £119.00pcm for her service charges.

Where residents are paying, we have come across people left with less than £10pcm for basic living expenses such as toiletries (including sanitary products), laundry products and money to use washing machines and dryers, travel costs, etc.

For example:

Julie has a full board room in a local hostel. This includes ineligible service charges for 3 meals a day, fuel, and laundry facilities.  She is 32 years old and receiving the standard allowance of £317.82pcm.  Deductions are being made from her UC totalling £126.81 per month (for court fines, benefit overpayments and an Advance Payment of UC).  This leaves her with £191.01 a month for living expenses. The ineligible service charges are £182.56 a month, leaving her with £8.45 per month (less than 28p a day).

If payments are being made direct to the landlord from the resident’s UC, it will also require the DWP to be notified each time the resident ceases to live at the accommodation.  If the resident lacks the capacity to do this (if reasons are being given in order to ‘protect the interests of the claimant’ then this is likely) their key worker can facilitate this as part of the process when the room is being closed.

Other things we may be able to do

Maximise income

We can we can further safeguard the resident by ensuring they have their full benefit entitlement (not just Housing Benefit) as a way of maximising their income.  For example checking they have an existing entitlement, making new claims for Personal Independence Payment or, checking whether they are in the correct limited capability for work group.

Frontline Services may be able to apply to the Vicar’s Relief Fund –

A grant of up to £350 can be paid for people who need help with accessing accommodation or preventing eviction and if successful will be paid within 1-3 days of the application.  An application cannot be made before a notice of eviction.  £350 could cover the cost of the service charges for up to 8 weeks (based on £40 a week).

http://www.frontlinenetwork.org.uk/funding/vicar-s-relief-fund/

UC Advance Payment

A request for an Advance Payment of UC can be made if the resident has already claimed UC, has had their ID verified but not yet had their first payment; or if they haven’t yet made a claim it can be requested at the verification interview at the Job Centre.  The advance can be up to 100% of their standard allowance, currently this is £317.82 for a single person over 25 and, £251.77 for a single person under 25.  This is then recovered from their ongoing UC award at a set rate each month over a maximum of 12 months, so it would be wise to request the lowest amount needed to avoid unnecessary financial hardship in the future.  For example, 6 weeks of service charges at £42.13 a week is £252.78.  This payment could then be used to pay the service charges, at least for the initial 6 week wait until the UC claim has been processed, as long as they are reimbursed if they move on sooner.

Negotiate lower deductions from UC

If a resident is struggling financially, they can ask for the amount of deductions to be reconsidered on the basis of financial hardship. Financial hardship decisions are only available when deductions amount to more than 10% of the Universal Credit Standard Allowance.  It may also be possible to ask for a court fine to be reduced and a means hearing can be arranged at a local court.  In our experience the debt has been written off completely by the court when there’s been a significant level of hardship.

Contact your local MP

The DWP states that it has a policy commitment to “Ensure a focus on homelessness prevention (alongside existing homelessness) and the broad spectrum of homelessness – from sofa surfing to sleeping on the street.”  (Local DWP Homelessness Forum update August 2019). 

The issue around ineligible service charges and UC is a national one but it seems to be random and intermittent.  The legislation and FOI VTR 5655 are clear, however it does not seem to have been disseminated to all DWP outlets and helplines and legislation is being interpreted differently in different parts of the country.  Rather than ensuring a focus on homelessness prevention, the current policy in many parts of the country is helping to facilitate an increase in homelessness.

Your MP can bring this issue before Parliament and push for the DWP to allow payments to be made from the person’s UC for the ineligible service charges before they get into any arrears and without any need to change the legislation.