What exactly does Universal Credit mean for landlords with social tenants? On the one hand, Universal Credit encourages claimants to be more responsible with their money but, on the other, it offers them the opportunity to spend that money on things other than their bills. As a landlord, you have a responsibility to support your tenants in their tenancy and this means putting processes in place to ensure that rent is paid and that your tenant doesn’t fall into debt.
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What Is Universal Credit?
Universal Credit brings together a number of different benefits into one monthly payment. This can feel like a salary payment, the idea being that paying benefits in this manner can help to prepare claimants for the transition from benefits into employment.
Universal Credit is a way of helping tenants become more responsible, financially aware and ultimately more skilled at managing their money effectively.
What Landlords Need To Know (And Do)
If one of your tenants is going to receive Universal Credit – and this may be a new tenant or an existing one – then you, as the landlord, will be notified.
At this point, you need to do two things. Firstly you should look to support your tenant. Secondly, you need to start putting plans in place to safeguard your rental income.
To both these ends, I would recommend that you should support your tenant in opening a credit union account.
Credit Union Accounts
A credit union account is like a jam-jar account where the tenant’s money is partially locked away and can’t be dipped into in the same way as a normal bank account.
So, your tenants might get a big lump sum of benefit payments each month – their housing benefit, their council tax benefit, their child benefit – but you can rest assured that your rent has been safeguarded and will sit in the credit union account and passed to you when it is due, without the tenant having the opportunity to intercept the process and spend it.
For you, as a landlord or investor, this works well as you know you will get the money that is owed to you.
But it is good for the tenant as well as it prevents them from straying into financial difficulty.
The Types of Credit Union
There are many different types of credit unions that your tenant could potentially access.
There are localised credit unions which tend to be small so your tenant would need to make an appointment to go and set up their account.
Because credit unions tend to be community banking services, usually staffed by volunteers and they are not always that well resourced, meaning you might sometimes have to spend a bit of time queuing.
But it is worth it! You, as a landlord, can make sure your rental income is going to be safeguarded and your tenant will be better protected from falling into debt.
Tasker Payment Services
Another way of balancing the effects of Universal Credit using credit unions is to use a web-based, credit union service.
An organisation I can recommend is Tasker Payment Services who provide credit union services, online.
The web-based element to Tasker makes things very efficient and easy for landlords; both with working with sign-ups and with keeping a check on your accounts, month to month.
With Tasker Payment Services, you are able to assist your tenant in opening their account and able to access their account number to make sure that their benefit is going to be paid.
They have great customer service too. Every time I have experienced an issue they have come back to me quickly and they have been effective.
But whether or not you choose Tasker or another service, a credit union is a good way of safeguarding your income while helping your tenant meet their responsibilities.
A credit union will help you to make sure that your property will always be in a healthy financial condition.
Who Manages The Universal Credit System?
One thing you need to be aware of with Universal Credit is that it is not managed by the local council or authority but by Central Government.
As a landlord or investor, you might be used to dealing with local housing allowance tenants.
Universal Credit is very different.
It is more centralised and much more online.
So, you need to be aware that you won’t be dealing with the local authority if you are dealing with the claim of a tenant in receipt of this kind of benefit.
Direct Payments To Landlords By The Universal Credit System
There are many ways that, as a landlord, you can receive direct payments from the Universal Credit system just as you could from the Local Housing Allowance.
This is one of the best things you can do if you are considering taking on a tenant with a Universal Credit claim, or, if you have an existing tenant, changing to universal credit,
I advise that you contact the Universal Credit team directly and communicate to them that you are the landlord of a claimant.
This way you can make sure that you are efficient in terms of giving them the paperwork they need and responsive to any requests for information.
Let them know that you are supporting the tenant in question with their tenancy.
And, it’s important to know that Universal Credit is paid in arrears so you may have a period of time when your tenant is short of money when they first make the claim.
If this is the case, you need to communicate with them to see if any allowances can be made and if the process can be speeded up.
But most importantly, it is really important to keep those lines of communication open (and to make sure that your tenant has given you permission to discuss their claim on their behalf).
Make sure there’s a disclaimer in place that’s been signed by all involved parties so that you’re able to make inquiries with the Universal Credit team if you have to.