Under the Housing Benefit Regulations, there are circumstances when a landlord is entitled to direct payment. Under previous rules (before Local Housing Allowance) one of those circumstances was if the tenant had made a request to pay direct to the landlord. Another example which continues to exist is if the tenant is 8 weeks or more in arrears. 1
If a landlord is entitled to be paid direct under some rule but the tenant is paid in error, although this payment in error may be a breach of the regulations, there is no power to make a second payment to the landlord to rectify the position. However, “the other possibility is compensation from the local authority” 2
Willey & Thompson v Durham County Council
In Willey & Thompson v Durham County Council SC227/12/05993 3 June 2014, it was accepted that the landlord (Mrs Thompson) was entitled to be paid housing benefit direct for the period 7 September 2009 to 29 November 2009. However, the local authority paid in error to the tenant (Mrs Willey) the sum of £1246.20 for that period. Mrs Willey never passed the money to the landlord.
After realising their error, Durham CC then paid the same amount (£1246.20) to the landlord.
Subsequently, the local authority sought to recover from the tenant the amount paid to the landlord. Just to clarify this sentence because it's quite important, it seems that the local authority were trying to recover from the tenant not the first payment made (presumably because the tenant was entitled to that amount) but were recovering the second amount which had been paid to the landlord. 3
It seems much correspondence and debate followed but the First-Tier Tribunal have been quite good at stripping back and getting to the main issue in hand.
The FTT held that because it was not possible for the second payment to the landlord to have been for housing benefit as dual payment is not allowed by the regulations (see Jacobs at footnote 2 below), the amount can only have been “compensation” to cover the landlords losses due to the error in paying the tenant. As only “housing benefit” is recoverable as an overpayment and “compensation” is not, the local authority were unable to recover any amount which was paid as compensation.
… The leading authority in relation to the matters raised [in this] appeal is the case of R(H) 2/08 where Commissioner (now Upper Tribunal Judge) Jacobs had to deal with similar arguments but 'reversed'. In that case the Local Authority was arguing that it could make a duplicate or second payment of HB which the landlord was claiming. … However UT Judge Jacobs makes it clear that such a payment is not provided for in the regulations and cannot be made. …
… they [Durham CC] had acted outside their powers in relation to the payment of HB and the only way in which the payment to Mrs Thompson could be understood or explained was if it were an ex gratis payment of compensation for her loss. That compensation is not recoverable from Mrs Willey.
[Paragraphs 14 & 15.]
There were other cases at the same time which were identical except amounts claimed. This case was considered to be the “lead case” and decided the outcome of the others.
Mrs Thompson (the landlord and no relation) is a long standing member of the Guild and must be congratulated for the outcome of this case. We've had no input except one phone call I think and this has all been done themselves. Rather cleverly, even though the tenant was the one where recovery was being sought, the landlord had managed to intervene and been allowed to appeal as a 'person affected'. An interesting point and outcome on it's own.
This case is a nice addition to Doncaster v Coventry City Council where compensation was ordered to be paid after a failure by the local authority to pay the landlord direct and paid the tenant in error instead.
See R(H) 2/08 – Mr E Jacobs Commissioner April 2007 – CH/3629/2006. Para 45 contains the part offering compensation as an alternative. ↩