Please Note: This Article is 7 years old. This increases the likelihood that some or all of it's content is now outdated.

Leeds based residential landlord and property entrepreneur Paul Galbraith explains to Richard Bowser, editor of ‘Property Investor News’ just what he has been doing to get ready for the introduction of Universal Credit?

Back in January 2013 I systemised all of my property business documentation and customised my online property management system that I will action with the introduction of Universal Credit (UC). I have made it a mandatory condition of my tenancy agreements that the tenant must get all LHA/UC monies paid into their Credit Union Account.

Many of my tenants have already pre-signed various documentation and I have deliberately asked them not to date it (just like when a solicitor would ask you to sign an exchange contract to buy a property), so for those tenants where I am currently getting direct payment, I have arranged for them to sign the paperwork ready for the change.

Some of my tenants I still need to contact, but within the next two months every tenant of mine will be told that they must open a Credit Union account and follow the system for payment of their rent on an ongoing basis.

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Given the challenges posed by this government’s imposed change and its obvious threat to my rental property income, those tenants who fail to action this will be evicted. They are currently on periodic tenancies at the moment, so I have no problems asking the non-compliers to leave and as of today’s date, I have at least a clear six months for all of my tenants to comply.

All new tenants will have to comply with the system I have implemented or they will not become a tenant – opening a Credit Union account and signing all required documentation is now a mandatory procedure to get a tenancy for one of my properties, so if this is not followed, a potential tenant will not get the opportunity to sign an AST.

Interestingly enough – all new tenants I have taken on this year have been more than happy to comply and that way they know exactly how much money they have left in their weekly budget and then don’t have a landlord chasing them for unpaid rent.

One advantage I have noticed with the ‘extra protocol of Credit Unions’ is that the standard of my tenants has actually improved. My conclusions for this are:

I am dealing with people who are happy to follow compliance/protocol.

Those tenants who find it too much hassle to follow the protocol, may find it too much hassle to keep up to date with supplying the local council information on their benefit claims.

Those who challenge the protocol are rejected as potential tenants – they may have slipped through the net previously. I have had some people get very argumentative about my procedures and try to use excuses to avoid them.

Getting tenants to fill out a comprehensive tenancy application form and posting it back to the landlord filters out about 70% of tenancy enquiries and it finds someone who is truly motivated to move into the property they have enquired about.

I am attending less viewings as a result of having a tenancy application form/credit union application process and I am actually reducing void periods faster than previously. Again this boils down to dealing with motivated tenancy applicants who will do what is required to comply, as their motivation is higher than those who just like to challenge authority or who feel the world owes them something.

Another bonus of using Credit Unions is they will notify the landlord if a tenant attempts to cancel any instructions to pay the landlord from the LHA/Universal Credit the landlord receives.

This means the landlord gets alerted to potential problems before they arise. Typically there is a 60 day notification period for any cancellation/amendments to payments due to landlords. This gives the landlord ample time to question the tenant directly about their motives with regards to payment interference and also to apply to the local authority notifying them that the tenant is a perceived financial risk. A direct payment protocol can also be actioned based on the evidence provided from both the landlord and Credit Union. This secures direct payment to landlords.

Landlords with benefit claiming tenants need to take action NOW and follow some of the protocols that I have mentioned – failure to do this and procrastination while hoping the government will do a U-turn or put a direct payment provision in place could result in rent arrears and hassle. Read below about a disaster that has already occurred.

‘A Universal Credit trial in Torfaen, South Wales has resulted in an increase in arrears from £20,000 to £140,000 in just seven months, between from July 2012 and January 2013.

The CEO of Brofn Afon Housing, Duncan Forbes is quoted as saying: “This was a group of tenants who had a good track record of payment and pretty low level of arrears, thrust into a position where they are now in significant arrears. The difficulty for us is that if there is no long-term solution to paying that rent then we can’t sustain a business as a landlord.”

Sadly I do find it a bit hard to find sympathy with the situation above – if enough research and homework had been done by the landlord/Housing Association in question, they would have anticipated the problems with Universal Credit and implemented Credit Unions as a successful system.

In sharp contrast, Genesis Housing Association in London ( has already done their homework and implemented this system. They have a simple to understand video on their website about welfare reforms that is a ‘must watch’ for any landlord dealing with tenants that claim benefits – those who watch the video, note the time 0:36 seconds into the video and the words ‘Credit Union Account’.

Genesis provides homes to over 100,000 residents with some 85 local authorities and they are already prepared for the benefit changes.

I personally believe that an average person can learn all that is required in respect of Credit Unions and how to work with them, including getting all the documentation/paperwork in place – within about ten hours.

Landlords who educate themselves and who read quality publications such as ‘Property Investor News’ will be ready for the challenge: For example: those reading this article now have a ‘heads up’ as to how I personally have already ‘taken action’.

Those most at risk are the ‘armchair landlords’, many of whom are often located some distance from their investment properties, relying on letting agents who have not put systems in place; who do not go to meetings run by local landlord accreditation schemes and who do not feel they need to spend any money joining reputable landlord associations.

There are also those landlords who are ‘too nice for their own good’ and who are not taking a business approach to what they do. They may optimistically be expecting the tenants to pay their rent from their Universal Credit payments – and I’m sure in many cases there won’t be issues, but tenants with debtors (who may have the power to ‘attack’ monies they receive in their account through court orders) or those feeling a financial pinch may well be tempted. So my view is: why take the risk?

As a whole – the amount of private sector landlords will probably reduce once Universal Credit is implemented. Fear of the unknown and horror stories will be the reason for an exodus. Those who read quality publications that keep you up to date with changes will hopefully take a more pro-active, balanced view and some may also recognize this change as a business opportunity.

If landlords with benefit claiming tenants ‘mirror’ rent collection methods used by Housing Associations – they will survive the future changes, and change is a big part of how the future is constructed.

“It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.”

Note; This article was first published in the monthly magazine ‘Property Investor News‘ – but in view of the upcoming roll-out of Universal Credit in 2015 it is very relevant to many landlords.

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Please Note: This Article is 7 years old. This increases the likelihood that some or all of it's content is now outdated.


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