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Rental Income, Collection and Arrears Policy

Introduction

The day to day management of the Trust’s properties is carried out by its Managing Agent who will work to and comply with the provisions contained in this policy.

This policy sets out the Selby & District Housing Trust’s approach to the setting and collection of rent and the management of rent arrears and other sundry debts.

Rent Setting and Rent Increase

Rent Setting

S&DHT homes are let on Assured Shorthold Tenancies, fixed over a five year term at an Affordable Rent. The Trust uses Affordable Rents to secure a sustainable revenue stream to invest in new housing, in addition to paying for the cost of managing, maintaining and improving its homes.

Affordable Rents are rents that can be charged at a maximum of 80% of the Market Rent (inclusive of service charge). A Market Rent is the amount of money a similar property would rent for if it was available at the time of letting on the private open market.

The Trust sets the initial Affordable Rent for new build or acquired properties based on an independent valuation which is be based on the Royal Institute of Chartered Surveyors (RICS) recognised method.

In order to meet its financial obligations the Trust usually sets the combined rent and eligible service charge for an Affordable Rent at a higher level than the relevant Local Housing Allowance (LHA) for the property. However, the Trust will always consider the LHA and the local market context when setting Affordable Rents and will advise potential tenants of any differences between the Affordable Rent and the LHA when properties are advertised on North Yorkshire Home Choice. The Trust will also complete an affordability check before any offer of accommodation is made where the Affordable Rent is in excess of the LHA to ensure the prospective tenant is aware of the cost of their new home and that both the prospective tenant and the Trust are confident that the tenancy can be sustained.

When an Affordable Rent property is to be re-let, or where the Trust is looking to renew the fixed term tenancy, the rent will be reviewed and adjusted accordingly through obtaining a new market rent using the RICS recognised method. Market estimates for similar properties in the area will be evidenced by consulting with or reviewing local estate and lettings agencies offerings, taking into account the individual characteristics of that property such as post-code, the condition and age of the property and the number of bedrooms. Where there are insufficient comparables for similar types of provision in the local area, comparables from other areas will be reviewed and then extrapolated using ‘best views’. This will ensure that the Affordable Rent remains no more than 80% of the relevant Market Rent.

The Affordable Rent is charged weekly and is collected over 52 (or occasionally 53) weeks a year.

Annual Rent Increase

Changes to rents will normally take place annually on the 1st Monday of April. Taking into account the Trust’s financial liabilities and obligations the annual rent increase on an Affordable Rent property will be the CPI (the Consumer Price Index) + Uplift. The CPI will be taken as at September of the previous year. The overall annual rent increase will be such that the rental charge (including any service charge) remains at an Affordable Rent.

The Board will consider and approve the annual rent at an appropriate Board Meeting before the rent change becomes effective.

Tenants whose rent and service charge is changing will receive notification of the changes at least 4 weeks before the change takes effect, in accordance with their tenancy agreement.

Rent Collection

Rent is due to the Trust in advance, on the date set out in the tenancy agreement.

The Trust requires its tenants to pay their rent by Direct Debit, but will consider other payment options if tenants are unable to pay using this method.

Rents and Service Charges are payable in respect of each week, or part thereof, for which a dwelling is tenanted.

 Service Charge Setting and Service Charge Increase

Rent charges may include service charges. These charges are collected with the rent and are usually varied at the same time as the annual rent increase. The Trust will only charge tenants for services they receive. These may include the cleaning and maintenance of shared areas, grass cutting and looking after planted areas, and replacing shared fixtures and fittings. The charge is calculated by dividing the total service cost by the number of households who receive or benefit from the service.

 Management of Rent Arrears

The Trust aims to maximise rental income collection and to help tenants keep a clear rent account. The Trust will highlight the connection between rent payments and its ability to provide a high quality service. Rent is the greatest source of income for the Trust and is used to meet the cost of managing and maintaining stock, developing and acquiring new stock and meeting the costs of financial commitments. In maximising income collection the Trust will:-

  • Promote a payment culture, encouraging early payment to help prevent tenants falling into arrears
  • Ensure that all new tenants are given advice about the payment of rent and benefits available.
  • Take a firm but fair approach to recovering rent arrears, placing a particular emphasis on early identification of any debt and early contact with the tenant
  • Engage with tenants promptly and proactively where arrears do occur and work with tenants to tackle the causes of arrears
  • Advise tenants where to find independent support and advice
  • Set clear expectations that rent payments should be made on time and offer advice services where financial difficulties are identified
  • In cases of persistent arrears or where repayment arrangements are not being kept, the Trust will take firm action, including legal action to repossess the property; although eviction is seen as the last resort
  • Seek to maintain/sustain tenancies rather than terminate them

The Trust has consistent and clear procedures in place to collect rental income, giving full details of action to be taken if a tenant is in rent arrears and a timetable for action. Key elements of the Trust’s arrears process include:-

  • Arrears will be monitored weekly to identify problems at an early stage and tenants will be kept informed about their rent balances.
  • A staged escalation process with a recommended action at each stage/level of arrears.
  • A mix of actions including letters, telephone calls, visits, texts and emails
  • A comprehensive record is kept of all actions taken and contact made with all tenants who fall into arrears.
  • The need for personal contact is made at an early stage and maintained throughout the debt recovery process, taking reasonable steps to ensure that the tenant understands any information they are provided with.
  • Requesting a ‘managed payment’ from Universal Credit (UC) should the tenant be in receipt of UC and have rent arrears of 2 month’s rent or more
  • A clear process around when and how the Trust escalates matters to use discretionary and mandatory grounds for possession offered in legislation (Schedule 2 of the Housing Act 1988, including ground 8) where a tenant is persistently in arrears

Tenancy Enforcement Action

Trust properties are let using a five year Fixed Term Tenancy. A Fixed Term Tenancy is an Assured Shorthold Tenancy agreement offered for a specified period of time. The Trust cannot end the tenancy before the end of the fixed term unless the tenant is in breach of their tenancy agreement. If the tenant is in breach before the end of the fixed term, the Trust will apply for a possession order if set grounds for possession can be proved.

The Trust will not normally issue possession proceedings for arrears if the tenant is complying with an arrears payment agreement. Possession proceedings will only commence when all other steps have been taken and all reasonable options to tackle the debt have been attempted.

Representatives from the Trust, usually the Housing Manager or Managing Director must approve each of the following stages of the formal legal proceedings:

  • Decision to serve a Notice Seeking Possession*
  • Decision to apply to Court
  • Decision to apply for a Warrant to Evict

The Trust can serve a Notice for non-payment of rent under the following Grounds for Possession (Housing Act 1988):-

Ground 8 can only be used when the tenant is at least 8 weeks in arrears, the landlord has served a Notice that they want possession and the tenant is still 8 weeks in arrears at the date of the possession hearing. This ground is mandatory and the Court must grant possession if this ground is proved. As such the sign off process needs to be rigorous and must be approved by the Managing Director before the Notice is served.*

Ground 10 – this is a discretionary ground and is used in all cases where arrears are at a stage to be referred to Court [any amount of rent arrears]

Ground 11 – this is a discretionary ground and is used where there are tenants who do not pay consistently/frequently leading to arrears occurring [persistent delays in paying rent].

Ground 10 and 11 are normally used in conjunction and where Ground 8 is used, Ground 10 and 11 are also usually incorporated.

The full set of Grounds (taken from the Trust’s Tenancy Agreement) can be found in Appendix 1.

In most cases discretionary grounds for possession will be used by the Trust, which enables the Court to decide whether possession is reasonable and proportionate.

* The mandatory Ground 8 will be used in the following circumstances and must be agreed by the Housing Manager and approved by the MD

  • The tenant has arrears of at least 8 weeks when the Notice is served and has arrears of at least 8 weeks following the expiration of the Notice period;
  • There is a persistently poor payment history;
  • The tenant has not engaged in or refused attempts at personal contact, or has failed to engage with support and has not made a reasonable offer to clear the arrears;
  • There is no Housing Benefit or Universal Credit claim outstanding or any reasonable expectation of HB or UC being paid;
  • Use of Ground 8 is proportionate and reasonable in the circumstances;
  • The tenant is not known as being vulnerable

There is no legal definition of a vulnerable person and vulnerability does not mean that a person will not be required to pay amounts they are legally obliged to pay. The cause of vulnerability may be temporary or may be permanent in nature and the degree of vulnerability will vary widely and each case will be considered on an individual basis, taking into account all relevant factors.

The Trust will always seek to recharge the tenant for any court costs and legal fees incurred by the Trust in taking any possession action against the tenant.

Management of Sundry Accounts

Any repair deemed as rechargeable through, for example, wilful damage or neglect by the tenant, their family or visitors, will be recharged to the tenant.

Refer to the Trust’s ‘Tenant Alteration & Improvement Policy’ and ‘Installation of Satellite Dishes Policy’ for more detail.

Management of Former Tenancy Accounts

Former Tenancy Arrears (FTA’s)

The Trust will ensure that all FTA’s are dealt with promptly and where there is a high probability that the debt will not be recovered it will be considered for write- off. The main principles the Trust will adhere to are:-

  • Early contact with former tenants with arrears including frequent contact during the termination period.
  • Swift referral to a Debt Collection Agency (DCA) where contact has not resolved the matter. Refer to the Trust’s’ Financial Regulations’ for more detail.
  • Regular review and consider appropriate write-offs for former tenant debt. Refer to the Trust’s ‘Financial Regulations’ for more details.

Former Tenancy Credits (FTC’s)

The Trust will ensure that all FTC’s are dealt with promptly and re-paid to the former tenant once the account has been checked/audited. Where the former tenant has another outstanding account with S&DHT the FTC will be offset against this debt.

Write-offs

The Trust recognises that a small proportion of its overall debt may not be collectable due to matters beyond its control and accordingly, where a debt is assessed to be irrecoverable, it will be considered for write-off. However, the Trust will seek to minimise the cost of write-offs by taking all appropriate action to recover what is due.

Furthermore, if a debt is written off but we are made aware that the former tenants circumstances have changed (e.g. if a former tenant has abandoned their property with no forwarding address, but is subsequently traced) such debts will be considered for write-on and considered for recovery proceedings.

Similarly, where the credit cannot be repaid to the former tenant it will be considered for write-off.

Refer to the Trust’s ‘Financial Regulations’ for more details.

Review

This policy will be monitored and updated where necessary to take account of changes in legislation and best practice. A review of the policy will be scheduled for 2 years from its initial introduction and thereafter as determined by the Board in accordance with best practice.

Complaint

Any tenant that has concerns related to this Rental Income, Collection and Arrears Policy, can make a complaint as per the Trust’s Complaint Policy. However, it should be noted that the Trust’s complaint procedure does not require the Trust to give an explanation of a decision made in line with the Trust’s policy.

Appendix 1 

Summary of the main grounds for possession which we might use (the full list is set out in Schedule 2 to the Housing Act 1988)

 Grounds on which the court must order possession

 (Ground 6) The landlord intends to demolish or reconstruct the whole dwelling or a substantial part of the premises.

(Ground 7) The weekly tenancy has devolved to the tenant through the will or intestacy of the former tenant and the landlord begins possession proceedings within twelve months of the former tenant’s death.

(Ground 8) On the date of the notice of seeking possession and at the date of the possession hearing there are at least eight weeks’ Rent unpaid.

Grounds on which the court may order possession

(Ground 9) Suitable alternative accommodation is available for the Tenant, or will be available for her/him when the order for possession takes effect.

(Ground 10) There were Rent arrears at the date when possession proceedings began and at the time of service of the notice seeking possession.

 (Ground 11) Whether or not there are any Rent arrears on the date on which proceedings for possession are begun, the Tenant has persistently delayed paying Rent which has become lawfully due.

(Ground 12) Any obligation of the tenancy (other than one related to the payment of Rent) has been broken or not performed.

(Ground 13) The condition of the premises or common parts has deteriorated and it is the tenant’s or another person in the household’s fault; and if the damage or neglect is caused by a lodger or sub-tenant, the tenant has not taken reasonable steps to remove the lodger or sub-tenant.

(Ground 14) The Tenant or a person residing in or visiting the dwelling house

(a) has been guilty of conduct causing or likely to cause a nuisance or annoyance to a person residing, visiting, or otherwise engaging in a lawful activity in the locality, or

(b) has been convicted of

(i) using the dwelling-house or allowing it to be used for immoral or illegal purposes, or

(ii) an indictable offence committed in, or in the locality of, the dwelling-house,

(Ground 14 A) The dwelling-house was occupied (whether alone or with others) by a married couple, a couple who are civil partners of each other, a couple living together as husband and wife or a couple living together as if they were civil partners and –

(a) one or both of the partners is a tenant of the dwelling house

(b) the landlord who is seeking possession is a registered social landlord or a charitable housing trust

(c) one partner has left the dwelling-house because of violence or threats of violence by the other towards –

(i) that partner, or

(ii) a member of the family of that partner who was residing with that partner immediately before the partner left, and

(d) the Court is satisfied that the partner who has left is unlikely to return.

(Ground 15) The condition of any furniture provided has deteriorated through ill-treatment by the tenant or other person living in the Premises and if the ill-treatment is by a lodger or sub-tenant, the Tenant has not taken reasonable steps to remove the lodger or sub-tenant.

(Ground 16) The Premises were let to an employee of the Trust and the Tenant has ceased to be employed by the Trust.

(Ground 17) The Tenant is the person, or one of the persons, to whom the tenancy was granted and the landlord was induced to grant the tenancy by a false statement made knowingly or recklessly by –

(a) the Tenant, or

(b) a person acting at the tenant’s instigation