(And why tenants on benefit may be a better bet anyway).
Tenants have been complaining for years about landlords and letting agents who refuse to even consider them as tenants as soon as they discover they are in receipt of benefits.
In the past few years many, with the assistance of organisations such as Shelter, have been challenging the practice. Now it seems that they have succeeded.
The legal justification
For years it was assumed that ‘No DSS’ policies were allowable as being in receipt of benefit is not a ‘protected characteristic’ under the discrimination legislation. These are set out here and consist of the following:
- age
- being or becoming a transsexual person
- being married or in a civil partnership
- being pregnant or on maternity leave
- disability
- race including colour, nationality, ethnic or national origin
- religion, belief or lack of religion/belief
- sex
- sexual orientation
Nothing there about being receipt of government benefits. So, the argument went, refusing to consider people as in receipt of benefits must be allowable.
“Not so,” said Shelter and other tenants organisations. A large proportion of benefit tenants are single Mothers and disabled people – who are protected. So discriminating against benefit tenants is disproportionately affecting people with protected characteristics. And so is unlawful.
Then came the cases
The first case which hits the news was in February 2018 when single mother Rosie Keogh, who had a perfect rental payment record, brought a claim against lettings agent Nicholas George, who had a ‘No DSS’ policy and who refused to consider her application.
Her case was settled but it struck a chord and made many landlords and agents change their practices.
Other cases followed but all of them settled – usually in the tenant’s favour.
However, now we have finally two cases where a Judge has, after having heard evidence, decided in the tenant’s favour. These are:
Jane’s case
The case of Jane (a pseudonym to preserve her anonymity) was decided in York county court – ‘Jane’ is a single mother who also lives with a disability.
Here the Judge, District Judge Victoria Elizabeth Mark, declared
rejecting tenancy applications because the applicant is in receipt of housing benefit was unlawfully indirectly discriminatory on the grounds of sex and disability, contrary to […] the Equality Act 2010.
Tylor v. Paul Carr
The second and more recent case was brought by Stephen Taylor, a disabled man, also with a perfect rent payment record. He was told by letting agent Paul Carr that it was “company policy” to refuse to rent to people who receive housing benefit.
In this case the Judge, Her Honour Judge Mary Stacey ruled that: “
There is no doubt that there was a blanket policy that no one in receipt of housing benefit would be considered for the three properties. It put the claimant and other disabled people at a particular disadvantage when compared to others.
To be told simply, because of his benefit status, that he could not apply for three properties which were perfectly located for his children’s school, his GP and health needs, and extended family support, […] would be distressing.
Going on to say:
we make a declaration that the defendant has unlawfully indirectly discriminated against the claimant by imposing a PCP [Provision, Criteria or Practice] that those in receipt of housing benefit could not apply to those three properties.
So where does this leave landlords and their agents?
The first thing to say is that you must not have blanket ‘No DSS’ policies. They have been found to be illegal and if you say to an applicant ‘we are not considering you because you are on benefits’ they will be able to sue you for compensation. Although maybe only if they themselves fall within the list of protected characteristics.
Even though the cases above were County Court cases and therefore not technically an authority for other courts to follow, it is unlikely that a case going to the Court of Appeal would be decided differently.
However, this does not mean that you HAVE to let to a benefit tenant. It just means that you have to consider their application properly, along with any other applicants.
Who you finally let to will depend on a number of factors – the most important being whether you think they will make a good tenant or not.
Bearing in mind that if you make a mistake you will (under the current Cornaivirus rules) be unable to evict the tenant for up to a year or more, rigorous checking and referencing is really important.
Allowable discrimination?
In some cases, you may have no alternative but to avoid benefit tenants – for example, if renting to benefit tenants is prohibited under the terms of your mortgage or insurance policy.
Although the mortgage and insurance companies concerned are probably themselves guilty of unlawful discrimination and fewer now do this.
Some landlords are also unhappy about renting to benefit tenants – not because of anything to do with the tenant, but because the Local Authority has proved so difficult to deal with in the past. This is something that you hear time and time again from landlords and letting agents. For example, we are often told that Local Authorities will
- Encourage landlords to trust them and then let them down.
- Encourage tenants to break the terms of their tenancy agreement
- Tell tenants that they must stay in the property – often without paying rent – when tenants go to them asking for help with rehousing
- Have staff who are rude and aggressive towards landlords and letting agents.
Avoiding benefit tenants because of the behaviour of the Local Authority is very unfair on the tenants but is understandable.
Why tenants on benefit may be a better bet
However, even with a difficult local authority, landlords should consider benefit applications. All of the applicants in the cases above had a perfect rent payment record – which is after all what landlords are looking for.
Responsible single mums like Rosie Keogh and ’Jane’ do not want to be evicted for rent arrears and so make sure that it will never happen. Likewise disabled people like Stephen Tyler. So they are not really a risk. Not more so than anyone else.
There is also the fact that we are facing a recession and unfortunately it looks as if many people are going to lose their jobs. So choosing a tenant with a job today does not mean that they will have a job tomorrow.
There is an advantage therefore in choosing a tenant who has proved that they are able to pay rent while in receipt of benefit. As your tenant who loses his job in a month or so may not.
If you are a tenant on benefit with a perfect rent payment record – you may want to point this out to prospective landlords and letting agents. And explain why they may be better off with you.
“In some cases, you may have no alternative but to avoid benefit tenants – for example, if renting to benefit tenants is prohibited under the terms of your mortgage or insurance policy.”
Is that in fact the case? If landlords cannot discriminate against persons on benefit then surely neither can mortgage lenders or insurance companies.
Its a moot point. I think the mortgage/insurance companies clauses may be void but as a landlord you would probably not want to risk it.
Ideally Shelter should now target those mortgage and insurance companies that have these clauses and get them to take them out.
Shelter are telling people that most mortgage and insurance companies have already done this or said that they will not enforce those conditions but no landlord is going to risk foreclosure or rejection of a claim on the strength of wishful thinking portrayed as fact by that organisation.
As a landlord you need to check for yourself whether these clauses appear in your mortgage door and/or insurance.
For example ask them to confirm in writing and keep a record of their reply.
I understand that companies with these policies are now in a minority. For example there are many excellent insurance policies for landlords which do not prohibit benefit tenants. See our insurance mini-course: https://landlordlawinfo.co.uk/landlord-law-insurance-mini-course/
“I understand that companies with these policies are now in a minority. ”
There are no companies willing to offer Rent Guarantee Insurance for DSS tenants.
The stark truth is the risk is too high.
What is the situation if the lease stipulates a no DSS policy?
Is it possible to claim that the terms of a lease are discriminatory and/or that the terms of the lease must comply with the current anti-discrimination provisions?
For many landlords the problem is not so much the behaviour of Local Authorities but the way in which Universal Credit is administered by DWP, e.g. refusal to communicate with landlords by email or telephone, stopping payment of benefit with no warning, notification or explanation to the landlord even when they have been paying the benefit to them (often for very good reasons such as previous default), suddenly reverting to paying the tenant, potential clawback of benefit paid direct, losing documents, failing to respond, opaque and extremely slow complaints procedure to name but a few of the issues that have driven many landlords to desperation.
The danger of a good tenant becoming unemployed and unable to pay the rent is of course a real one and underlines the need for tenants to be supported by a solvent, home-owning guarantor, which for many landlords has become a sine qua non.
Thank you all for your comments. It seems as if in many cases the problem for landlords is not the tenants personally but the way the benefit schemes work, the attitude of some local authorities, and the mortgage and insurance compaies who penalise them in their products.
Maybe this is where Shelter should now direct their attention?
In the meantime landlords – you still need to consider all applicants and I still think many benefit tenants (those with perfect payment records) would be worth considering seriously.
Hello Tessa,
If I advertise `Working only` that does not imply that benefits claimants will not be considered.
Is this `work around` acceptable?
Thank you
Probably not. I may put this question to the barrister in our forthcoming webinar on the DSS case which you can read about here: https://landlordlawblog.co.uk/2020/10/05/landlord-law-legal-cases-webinar-looks-tyler-v-carr-barrister-tessa-buchanan/
When Heather Kay Wheeler was the Minister for Homelessness at the MHCLG, she actively brought together the Association of Residential Letting Agents (ARLA), the National Residential Landlords Association (NRLA), some of the UK banks, building societies, homelessness charities and other associate groups, to discuss the “No DSS” policy problem. so the entire issue could be resolved. Some progress was made, and Natwest Bank, Metro Bank, and others removed the “No DSS” clause from the Terms and Conditions of their BTL mortgage policies for all existing BTL landlords and prospective BTL landlords. Yet, the Ministry of Housing, Communities & Local Government (MHCLG) still has not done the same with the remaining UK banks and building societies that still have “No DSS” clauses in the Terms and Conditions of their BTL mortgage policies.
Therefore, such discrimination needs to be stamped out by the MHCLG. Kelly Jane Tolhurst is the new Parliamentary Under-Secretary of State for Rough Sleeping and Housing, and in her new role with be dealing specifically with such issues in the Private Rented Sector. She is also the Member of Parliament (MP) for Rochester and Strood, which are areas where there is an extensive social problem with decent quality, rentable housing for families. Everyone has seen how individuals like Rosie Keogh, Amanda Staples, Emma Loffler and Stephen Tyler, have successfully won their “No DSS” discrimination cases in County Courts, because of the way they were treated by certain letting agents.
Hence, the No DSS problem has become intensely politicized and is well known about in the media. The other aspect, which concerns “rent defaulting tenants” is relatively easy to resolve. If the MHCLG introduced a system, where any tenant with a 5 year previous rental payment history, had any record of defaulting, and they were in receipt of Housing Benefit, their future rental transactions should be done by using Direct Landlord Payment (DLP). The DWP already has a system like this with Universal Credit “Housing Element” payments. By using this method, any future risk of them rent defaulting, would end immediately. The use of DLP could say, last for 2 years, and such tenants could then go back to paying the rent themselves. If they default again, DLP would be used again.
Look, it’s quite simple. If a person is on benefits, a mortgage application will be denied. Credit cards with low interest rates are impossible to achieve. Even renting something like a car is a challenge. Yet these things aren’t considered discrimination in the eyes of the law. There’s some good people that have a good reason for being on benefits that are very trustworthy. But the benefits agency is the problem, they can’t be trusted. I hate shelter & their landlord bashing stance. They should go after the problem not the symptom, but by being government funded (yes they are), they will never bite the hand that feeds them. This in my mind makes them irrelevant. I actively encourage people to shame their activities. How many people have they helped to fund in paying rent so far? None to my knowledge. They are a disgrace to the charity sector & should have their funding removed immediately. That 20 million could be so much more helpful in tackling housing issues. Awful, just awful.
It’s not illegal.
It’s technically “unlawful”.
The difference is important.