A guide for landlords – rent arrears and service charges

27/01/2022 00:00

1. What is a third-party deduction

The third-party deduction scheme is designed to protect claimants in receipt of income-related benefits. It is used when a claimant has arrears of essential household outgoings and has failed to budget for these bills. Other methods to recover the debt must have been tried, for example negotiating different ways of paying and managing bills. There must be a real threat of enforcement action before consideration is given to applying for a deduction.

The following benefits may have a third-party deduction:

2Why a third-party deduction is taken

Third party deductions act as a safety-net to protect claimants when they have debts for essential household bills. They are only taken when it is in the interest of the individual or family, for example to prevent severe hardship caused by eviction and homelessness.

Landlords and tenants should take reasonable action to recover the arrears before applying for deductions.

3. How the scheme works

We deduct a fixed amount to clear the arrears. This is legislated for in Schedule 9 to the Social Security (Claims and Payments) Regulations 1987. The amount is deducted from the individual’s benefit at source and paid directly to the creditor until the debt is cleared.

Where there is an ongoing liability for service charges included with the rent, an additional amount is taken to cover these costs. This is to prevent further debt accruing and to help with budgeting in the future.

Where there is more than one debt, we can take a maximum of 3 deductions at any one time. DWP will apply the priority order when more than 3 applications are made.

Once a debt is paid off, a third-party deduction will usually end. In some cases where the individual repeatedly mismanages their money, a deduction may continue to cover ongoing costs.

4. Debts covered by the scheme

The types of debt covered by the scheme are rated in a priority order. This reflects the degree of risk to the individual or their family by the enforcement action that may result from non-payment. The order is:

  1. Housing costs for specific mortgage arrears
  2. Miscellaneous accommodation costs, care homes and private hospitals
  3. Hostel charges
  4. Rent arrears including service charges
  5. Main fuel costs like gas and electricity
  6. Water charges (water then sewerage if 2 debts)
  7. Council Tax and community charge arrears
  8. Fines
  9. Child Support maintenance under the old scheme
  10. Refugee integration loans
  11. Eligible loans

5. What can be included in the debt

The total debt may include any legal or other costs incurred to recover the arrears.

6. Who can apply

You can apply for the scheme if you’re:

  • the claimant or their representatives
  • the landlord or their billing agent

7. How to apply

Use the application form for third party deductions for rent and service charges (the last document attached to the main ‘Deductions from benefit’ page) if you’re applying for a deduction from:

  • Jobseeker’s Allowance
  • Employment and Support Allowance
  • Income Support
  • Pension Credit

Send the completed form to the DWP benefit or pension centre that deals with the claimant’s benefit.

Read the Universal Credit third party deduction guidance  if you’re applying for a third-party deduction from a Universal Credit payment.

8. Content of the application

We must be able to identify the claimant from the details on the application for deductions. This should include the following where possible:

  • confirmation the claimant is in receipt of Housing Benefit
  • claimant’s name
  • address
  • date of birth
  • National Insurance number, if known, although applications will be accepted without this
  • ·name and address of the creditor making the application
  • the AP number of the creditor
  • the customer reference number
  • type of benefit being paid to the claimant, if known
  • ·other payment methods which have been tried
  • amount of the debt, including any costs
  • full weekly rent amount
  • proof of 8 weeks or more accrued debt
  • any figure to cover ongoing liabilities

We may need further information before making a decision, normally where the claimant has made the application, for example:

  • the amount of the debt
  • the weekly ongoing liability
  • any other information needed to process the application including details of:
    • any other methods of repayment already tried
    • any existing overpayment recovery from Housing Benefit
    • any disputes

9. Consent for deductions

Most third-party deductions are imposed but there are some occasions where consent is needed from the individual. This only applies where the total amount of all deductions including any amounts to cover current costs, exceeds 25% of the main benefit, including any Child Tax Credit and Child Benefit in payment. We will identify these cases and seek the consent. Consent only applies for the following debt types:

10. How we decide if a third-party deduction is appropriate

We’ll consider:

  • if the individual is receiving one of the specified benefits in section 2
  • if there is a threat of enforcement action for the individual and their family
  • if there are outstanding arrears of at least 4 full weeks’ rent accrued over a period of 8 weeks or more
  • if the individual or their partner is liable for the debt - an individual or their partner will normally be liable for the debt if named on the tenancy agreement; there may be occasions where we cannot make third party deductions, for instance deductions may not be made if the debt is the responsibility of a partner who has left the household
  • if a deduction is in the interests of the family
  • if the individual will be left with sufficient amount of benefit (10p benefit) to qualify for other linked benefits such as prescriptions, Housing Benefit and local Council Tax Reduction
  • if the debt takes priority over other debts - if there are already 3 other deductions for arrears in place, we’ll check the priority list in section 4; if the new request is for a higher priority debt, the lowest priority deduction will be stopped
  • if consent is needed - if so, we’ll take action to ask the claimant for their consent

11. Payments

Payment is made into a nominated bank account every 4 weeks in arrears. It may take up to 6 weeks before the first payment is received. We can take a maximum of 3 deductions at any one time.

Information on payment queries

Source: A guide for landlords – rent arrears and service charges - GOV.UK (www.gov.uk) 

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