The Ombudsman's final decision:
Summary: The Council accepts it gave Mr X misleading information about its Direct Let Scheme. The Council has apologised to Mr X for this. It has agreed our recommendation to confirm it will not recover any of the incentive payment it made to Mr X. It has also agreed to improve the information it gives applicants to the scheme to prevent reoccurrence of this fault. The Council is not at fault for the way it administered the scheme.
- Mr X complained the Council gave him misleading information about how its Direct Lets Scheme worked when he first discussed letting a property through the scheme. He understood the Council would:
- vet prospective tenants to ensure they were entitled to housing benefit
- ensure the housing benefit payable was sufficient to cover the rent
- pay the housing benefit directly to the landlord
- put in place insurance to cover any arrears arising in the first 12 months
- pay an incentive payment for joining the scheme
The Ombudsman’s role and powers
- We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
- If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)
How I considered this complaint
- I spoke to Mr X about the complaint and considered the information he provided.
- I considered the Council’s replies to my enquiries.
- I gave the Council and Mr X the opportunity to comment on my draft decision and considered those comments.
What I found
- The Council runs a Direct Lets Scheme where it works with private sector landlords to provide private rented properties for prospective tenants on the housing list in its area.
- The scheme’s marketing information says the Council will:
- Pay an incentive payment to the landlord
- Assist the tenant with the paperwork to claim housing benefit
- Pay housing benefit directly to the landlord
- Set up an insurance policy to cover rent arrears for the first 12 months
- Mr X says the Council approached him about letting his property through the Direct Lets Scheme. He discussed the scheme with a Council officer and agreed to let his property through the scheme. The Council arranged viewings for three prospective tenants on 24 April 2017. Mr X agreed to let the property to Mr T.
- Mr X and Mr T signed the tenancy agreement at the Council offices on 26 April 2017 and the document was witnessed by a Council officer. The Council says Mr X was in a rush so it had insufficient time to do more than give brief advice about the tenancy agreement. Also on 26 April 2017, Mr T was given a key to the property and he moved in the same day.
- On 15 May 2017, the Council sent basic information to the Council’s chosen insurer so it could set up an insurance policy to cover unpaid rent for 12 months. The insurance policy started on 23 May 2017. The Council say Mr X was not affected by the short delay in setting up the policy because the policy did not cover any unpaid rent for the first month. This is because housing benefit is paid monthly in arrears. The Council says part of the delay in setting up the policy was due to the insurer being unable to contact Mr X.
- The Council said it could not pay Mr X his incentive payment until it did so on 30 May 2017. This was because it needed an invoice from Mr X. I do not know when the Council received this invoice.
Housing benefit and payment of rent
- In the same email on 30 May 2017 Mr X said he had not received any rent. Mr X says he was told by the Council on 1 June 2017 that the rent was a private matter between himself and his tenant. On 2 June 2017 Mr X complained to the Council. He said:
- The Council had told him payment of rent would start from 24 April 2017 but now the Council was saying it would start on 26 April, which was the date the tenancy was signed
- He had not received any rent for May
- He had not had a document confirming the housing benefit had been assigned to him
- He had been misled by the Council - it said it would vet prospective tenants to ensure they were eligible for housing benefit
- There was a short delay of around 2 weeks between signing the tenancy agreement on 26 April and the Council sending the information to the insurance company on 15 May to set up the policy. The policy commenced 23 May 2017 but I cannot hold the Council responsible for any delays after it sent the information to the insurer. Mr X can claim on the insurance for unpaid rent after the first month.
- The incentive payment was paid by 30 May 2017, just over a month after the tenancy agreement was signed. The Council has said it need an invoice from Mr X to send on to its finance team before payment could be made. The Council has not delayed significantly in making payment. It is not at fault.
Housing benefit and payment of rent
- The Council has accepted its officer gave misleading information about the Direct Lets Scheme, which gave the impression that the Council would guarantee the rent. It says it was the insurance policy that was supposed to provide the guarantee.
- The Council set the rent at the level of the local housing allowance – this is the maximum housing benefit a tenant could claim for a property of that size in that area. It probably did not tell Mr X that the tenant may not be entitled to housing benefit at that level.
- The Council says it explained the tenancy agreement to Mr X and Mr T when they signed. It has provided no record of the advice it gave them. I understand the tenancy agreement was provided by Mr X and therefore he should have been aware of its terms. The Council has not demonstrated that it informed Mr X that the responsibility for the payment of rent was a private matter between Mr X (as landlord) and his tenant and that it was not guaranteeing the rental payments. Nor has it demonstrated that it told Mr X that Mr T’s eligibility to housing benefit could not be confirmed until his claim had been finalised or that it might change in future if Mr T’s circumstances changed.
- As Mr T was receiving housing benefit for his temporary accommodation the Council assumed he would be eligible for housing benefit for Mr X’s property. The Council has not demonstrated it considered what amount of housing benefit may be payable and whether this was enough to cover the rent it had set. Further, the Council has not demonstrated it told Mr T at the time of the agreement he was responsible for paying any shortfall between the housing benefit awarded and the full amount of the rent. It says it told Mr T about this on 19 June 2017 – I have not seen this letter but it was sent nearly two months after the tenancy agreement was signed.
- The information the Council gave Mr X says “Payment commences the date we accept the property”. It accepted the property on 24 April 2017. However, rent was only payable from the date the tenancy agreement was signed, which was 26 April 2017. The Council has said the 2 days delay was due to Mr X being unavailable to sign the document sooner. However, its general information about when payment commenced was misleading because the Council could not pay housing benefit or ask a tenant to pay rent from a date before the tenancy commenced.
- The Council has demonstrated that it assisted Mr T to claim housing benefit and it has said that all housing benefit was paid directly to Mr X.
- In summary, the Council did not give Mr X adequate information about the scheme. It did not adequately explain what it agreed to do and where Mr X’s risks lay. This is fault. This fault meant Mr X could not make an informed choice to participate in the scheme. It also meant he did not undertake his own checks on the tenant. He suffered inconvenience and financial loss as a result of relying on the misleading information he had been given.
- Mr X says he has lost £6,401.19 in lost rent. I have seen a court order awarding Mr X £6,477.18 which included rent due, interest and court costs. The Council’s lack of clear information caused uncertainty. I do not accept this fault caused the entirety of the losses Mr X claims. The Council says it has paid Mr X an incentive of £5,990.40 for a two-year tenancy that ended within 5 months. It has said it does not intend to reclaim the over-payment. Therefore, I consider the Council has already provided an appropriate remedy for the faults identified.
- The Council has agreed it will, within one month of the date of the final decision:
- Apologise for the faults identified
- Confirm to Mr X that it will not recover any part of the incentive payment already paid to him
- I have completed my investigation. I have found fault leading to personal injustice. I have recommended action to remedy that injustice and prevent reoccurrence of that fault.
Investigator's decision on behalf of the Ombudsman