Letting to LHA

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  • Letting to LHA

    Hi. We've just taken on our second BTL property and through contacts the Local Housing Resourcing Officer has found a tenant for us, but not having experience of LHA I wanted to ask some questions.
    The council have vetted the property and are happy with it. It's a recently refurbished 3 bed mid terrace.

    So I understand from the council that the deposit is by way of a Bond and that because I don't get any cash that I don't need to protect it. Is this correct I thought I'd seen that even council bonds need to be protected.

    Also what should I do about vetting this tenant (Mum with 2 kids). We have an NLA application form that's been completed. I will ring their previous landlord, who is emigrating, hence the need for the tenant to find new housing, to verify that they were a reliable tenant. The rent will be paid directly by the council to me. What reference checks would you normally do on LHA tenants who are very unlikely to pass a credit check?

    Thanks for any advice.

  • #2
    You are correct in your understanding that the deposit bond does not need protecting. Just make you understand the conditions that are attached to the bond being underwritten by the council.

    In respect of references, in addition to the previous LL check, I would take a guarantor. With the changes to LHA being implemented over the next few years, taking on a benefit tenant will be a little more riskier than present.


    Good Luck

    Comment


    • #3
      Is your contract going to be direct with the tenant? Or are you signing a contract with the LHA to let to their tenant?

      If its direct with the tenant, then this is the same as any other tenancy and LHA have no involvement, other than putting a tenant you way. In this case, I would say you definately need a guarantor. You should credit check the guarantor and get the guarantor agreement drawn up and a legally witnessed deed, otherwise it may be useless if you need to enforce a claim against the guarantor. The guarantor also needs to see a copy of the tenancy agreement prior to signing, as they can claim they did not know what they were signing against, and challenge any claim you make on them.

      If you are letting to the LHA, to let to their tenant, then read the small print of the contract carefully. Some tenancies with the LHA have proved to be very costly to the LL, as property is used and abused and LHA hand it back and the end and walk away without any obligation to pay for repairs!

      I believe the is also a specific form you can request a benefit tenant to sign at the start of the tenancy, allowing you to approach the benefit office and request information on their claim, and that the benefit is paid direct to you should the tenant call into arrears. I hope you appreciate that it is common for benefit to only cover part of the rent, and tenant to have to make up the shortfall.

      Comment


      • #4
        I would now treat a HB tenant in the same way as any other, if they fail the credit checks and the affordability insist on a gaurantor. If they have a bad credit history avoid. If there is a problem how are you going to recover maybe several thousand pounds from someone on benefits?

        A few points to consider with LHA:-

        LHA is usually paid 4 weekly in arrears. A bit of a pain keeping track if you tenancy is rent in advance, pcm.

        Be prepared for the letter that says "Your tenants LHA claim has been suspended, you should arrange to collect the rent direct from your tenant". Can you cover your bills for a few months while it is sorted out?

        LHA levels are set at the bottom third of rent levels in your area any extra will need to be collected from the tenant. Is your property in a poor area or a bad state?

        If you want to end the tenancy will your LA insit on the tenant staying until the day before the bailiff arrives?

        Check very carefully the wording of the LA bond scheme many are virtually useless in practice.

        Can you get rent guarantee insurance for a LHA tenant?

        Comment


        • #5
          Thanks both for the comments.
          The AST will be with the tenant, and as far as I can gather the LHA are just pushing a tenant our way and providing the bond for the deposit.

          Does anyone know if the LHA would increase the bond to 2 months to provide me with more security, I can ask but just wondering if this is a common thing.

          Comment


          • #6
            no harm in asking...i suppose it will depend on how desperate they are to get rid of their homelessness duty!!!

            Comment


            • #7
              Can we clarify please, are you referring to LHA as:

              Local Housing Authority, ie a Housing Association near you

              OR

              Local Housing Allowance, ie the new name for Housing Benefit.

              From your initial post mentioning the Local Housing Resource Officer having put the tenant in touch with you, I assumed it was the former definition (hence my earlier reply mentioning a contract with the HA direct), but wondering now if its the latter. Please forgive my confusion!

              Comment


              • #8
                Originally posted by Kwaka View Post
                So I understand from the council that the deposit is by way of a Bond and that because I don't get any cash that I don't need to protect it. Is this correct I thought I'd seen that even council bonds need to be protected.
                There will be no deposit, so obviously there will be nothing to protect.
                The 'deposit bond' is just a guarantee from the council that they will pay for damages, etc. up to a certain amount, subject to conditions that you must understand as previously mentioned.

                So in effect you will just have a guarantor, albeit one that should be reliable.

                Comment


                • #9
                  Originally posted by LesleyAnne View Post
                  Can we clarify please, are you referring to LHA as:

                  Local Housing Authority, ie a Housing Association near you

                  OR

                  Local Housing Allowance, ie the new name for Housing Benefit.

                  From your initial post mentioning the Local Housing Resource Officer having put the tenant in touch with you, I assumed it was the former definition (hence my earlier reply mentioning a contract with the HA direct), but wondering now if its the latter. Please forgive my confusion!
                  Local housing allowance.

                  Comment


                  • #10
                    I wonder if I could ask for some further opinion.

                    The tenant that has been found for us, not sure if I've said above, is classified as homeless, has 2 kids and a dog. The council will pay rent directly, 4 weeks in arrears. I have an application form that's been completed. I have contacted the old landlord to get a reference, awaiting response. I have also decided to do a basic credit check this morning. I can see a single CCJ that's been registered in Feb of this year. It says that it's unsatisfied. It looks to have been a moneyclaim online claim from what my research tells me. I realise that people receiving LHA may have had money troubles and one's where we're getting paid directly probably even more so.
                    I asked the T for a guarantor and some bank statements, but the local housing resourcing officer then rang to explain that the tenant doesn't have anyone to act as guarantor and that they are providing a bond and paying rent directly for her which should be sufficient for me.
                    So for those people accepting LHA T's is this the norm, and considered acceptable?

                    As this is my first T through the council I'm trying to find my way a bit and see if the risk is acceptable to me.
                    Any other questions I should be asking?

                    Comment


                    • #11
                      Originally posted by Kwaka View Post
                      The council will pay rent directly, 4 weeks in arrears
                      If you do proceed ensure that the tenancy agreement states that the rent is payable monthly, not 4 weekly.
                      This is to ensure that you would be able to evict based on section 8, ground 8 in case of rent arrears (unlikely if rent is paid directly by council, but better safe than sorry).

                      Comment


                      • #12
                        You seem to be considering a tenant with a recent unpaid CCJ and no guarantor - why?

                        Have you advertised the property and not had any other responses?

                        Comment


                        • #13
                          We have not advertised the property, the council were aware that we were buying it and found us a potential T immediately.
                          The advantages to this are we get someone in immediately, we have no advertising costs. We are accepting some risk on the CCJ (although I have only just this morning found out about that) as the rent will be paid direct from the council, and they are funding the bond. I haven't of course yet decided whether to go ahead.... but this must come up time and time again for landlords. Of course its down to my appetite for risk... just interested to see if I'm at the "totally mad, I wouldn't touch this with a barge pole" end of the spectrum or the "actually this is a fairly normal situation with LHA T's". As I have no experience to know what's normal its just helpful to understand what else I should be doing or just walking away.

                          Comment


                          • #14
                            Just a quick check.

                            Do you have a mortgage for this property? If yes, does your lender allow you to rent to LHA tenants? See the link below.

                            http://www.landlordzone.co.uk/blog/n...enefit-tenants

                            Also does your landlords insurance allow you to rent to LHA tenants?

                            Comment


                            • #15
                              Originally posted by Kwaka View Post
                              The advantages to this are we get someone in immediately, we have no advertising costs.
                              Please take your time finding a tenant and do not take someone that is not ideal because they can move in quickly.

                              I would spend £100ish in one of the online agents that will get you on the big sites like rightmove. I have used upad and found them very good but I am aware of others that are cheaper. You could have you details online tonight. Give it a few days and see what response you get.

                              If you have a good property priced correctly I dont think you will have a problem finding a really good tenant.

                              Edit just seen Mrs Mugs comment - you will probably get your £100 back if you let to working tenants because your LL insurance will be much cheaper.

                              Comment

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