Managing Rent Collection

Housing Associations must adopt and follow good policies and procedures in relation to the whole area of Rent Collection.

Introduction

Rental income is a major source of finance for Housing Associations and is used to meet the costs of their financial commitments and managing and maintaining their housing stock. It is therefore important for Housing Associations to adopt and follow good policies and procedures in relation to the whole area of Rent Collection.

The Department would adopt the view that tenants have a responsibility to pay their rent on time and equally Social Landlords have a responsibility to maintain and sustain tenancies. There will however be occasions when failure by a tenant to pay rent may result in more serious action being taken resulting in court action and eventual eviction. Eviction should always be viewed as a last resort and should only be used when all other avenues have been exhausted. Eviction has high social and economic costs for both the tenant and the Association and frequently results in the debt being unpaid and the Social Landlord left to pay court costs. Therefore, the Department would urge all Social Landlords to place an increasing emphasis on alternative approaches with a focus on preventative, rather than reactive, strategies.

By adopting good practice in the management of rent collection, Social Landlords can help to avoid or reduce arrears. Managing the collection of rent has a number of themes and guidance is provided on the following key areas:

• rent policy
• rent collection
• preventative measures
• arrears collection
• former tenants arrears
• legal action
• write off of bad debts

The Department will use this guidance as a basis for future inspections of Housing Associations. The individual circumstances of each Association will be taken into account by the Inspection Team when deciding what procedures can reasonably be expected to be in place.

Strategic Approach

The Departments priorities are “building communities, tackling disadvantage and encouraging social responsibility”. It is therefore imperative that tenants are made aware of their social responsibilities to the Association, namely to:

• pay their rent on time
• let the Association know if they have difficulty making payments
• keep the Northern Ireland Housing Executive (NIHE) up to date with any changes that may affect their housing benefit

Social Landlords also have a responsibility to help sustain tenancies by:

• informing, assisting and communicating with the tenant
• advising the NIHE of any changes of circumstances reported by tenants as soon as they are known, that may affect the payment of Housing Benefit

Organisational Structure

It is important that the Association creates the correct culture and organisational structure that maximises income and minimises expenditure. The key areas are as follows:

Resources

Housing Associations should ensure that they allocate sufficient resources to the task of rent collection and that they make the best use of these resources by:

• ensuring there is clarity on staffs roles and responsibilities in relation to rent collection, arrears prevention and recovery
• providing adequate training to enable staff to perform their jobs
• providing the necessary policies and procedures and ensuring that they are clear on how to interpret them
• holding regular meetings between managers and staff who deal with arrears
• ensuring that staff have the necessary authority to carry out their roles effectively

Communication

Good communication is vital to the success of any rent collection procedure. Housing Associations should ensure that:

• effective communication is maintained with tenants throughout their tenancy
• effective communication and information links are maintained between rent collection management and other related services e.g. NIHE for Housing Benefit and Social Security Agency for other benefits
• effective liaison is maintained with other organisations e.g. the Departments Housing Division and the Northern Ireland Federation of Housing Associations
• data is shared where possible between organisations and also ensure it is registered under the Data Protection Act

Tenant Support

Housing Associations should aim to provide as much guidance and support to tenants as they can in relation to payment of rent to ensure that the tenant is able to pay the “right amount of rent at the right time”. Associations should consider the resources available to the area of rent collection and decide the level of service that can be provided. If resources are limited Associations should seriously consider outsourcing some of their services. The types of areas for consideration could be:

• benefit advice & form filling
• arrears management
• debt counselling

If Associations can provide a support service to tenants they should ensure that staff:

• provide advice and assistance for all tenants, maintaining contact through letters, phonecalls and visits
• focus on providing advice and assistance to new tenants so that they do not fall into debt
• recognise the importance of good benefit administration in managing rent collection
• routinely check entitlement to benefits and encourage timely applications
• offer basic money advice and be aware of the need to refer more vulnerable tenants on to floating support or external agencies
• establish and maintain good liaison with benefits staff both in the Social Security Agency and the Northern Ireland Housing Executive
• promote money advice services and debt reduction strategies or signpost tenants to organisations who can provide these services
• recognise the impact of Housing Benefit overpayments when they arise
• manage the recovery of Housing Benefit overpayments separately from rent arrears. (This applies where the overpayment is allocated to the rent account as a lump sum. It does not relate to a weekly reduction in benefit)
• request that while benefit claims are being considered, tenants make a reasonable contribution to rent payments so that should their application be rejected or a lower level of benefit than expected be granted, arrears have not built up. (The tenant to be refunded excess payments when Housing benefit is received)

IT Support

Any process will always be enhanced with the support of good IT Systems. Housing Associations should ensure that the IT system(s) can:

• be optimised to the full in managing rent collection
• produce customer friendly statements and letters
• enable staff to identify the emergence of arrears at an early stage.
• prompt the next action to be taken
• record all action taken against prompts and identify anyone who fails to consider their prompts on any given week.
• identify different types of debt i.e. normal arrears / housing benefit overpayments
• provide managers and staff with the information/reports they need, on time, to manage rent collection and monitor performance
• allow for a wide range of payment methods including online payments through credit/debit cards, direct debits, payzone, standing orders, etc
  (please note that a warning against getting into more serious debt should always be given to tenants paying by credit card)
• provide information/leaflets in different formats i.e. different languages, different font sizes and Braille
• identify tenants who are in arrears and who are not keeping to repayment agreements
• provide systems such as income and expenditure spreadsheets and Housing benefit calculators for the evaluation and recording of tenants financial circumstances, allowing for effective budgeting and benefit entitlement advice

Staff must also be provided with effective training in order to use IT systems effectively.

Rent Collection Policy

As a first step it is imperative that all Associations put in place a “Rent Collection” Policy. This policy should be published and must aim to fit within the wider goals of the housing provider and the strategic context within which it operates. It should be supported by a culture where rent collection is given a high priority and where the appropriate resources, with relevant delegated authority to carry out their duties in pursuance of rent collection, are made available. The policy should also aim to be flexible to respond to the individual circumstances of each tenant and at the same time reflect the priorities of the Association namely to generate sufficient income to meet their financial obligations.

The Rent Collection Policy should include the following:

• a formal rent collection statement which clearly sets out the Associations approach to the management of rent collection. The statement should be comprehensive incorporating arrears prevention, arrears management, recovery actions and action to deal with former tenant arrears
• written procedures that support the policies and guide staff through all stages of rent collection. The procedures should be comprehensive, including timescales for action, expected levels of contact with tenants and the steps to be followed to assist an effective rent collection process which facilitates a degree of discretion and flexibility to respond to individual circumstances of each case
• strategies that are proactive and focus on a preventative approach rather than being focussed mainly on reactive enforcement measures
• details of acceptable arrangements for tenants to repay arrears
• details of the monitoring arrangements to be put in place to identify cases where arrangements have broken down and where follow-up action needs to be taken to prevent small arrears becoming larger
• guidelines on the use of possession actions that involve a range of alternative and/or complementary measures
• a formal policy relating to eviction (including eviction due to non-payment of rent)
• contact points for advice and support for both association staff and tenants
• details of the management information required for Management and the Board to provide them with details of performance of the association in relation to rent collection. This information should include details of the level of arrears, action taken and progress on legal cases and an analysis of the incidence and pattern of rent arrears among their tenants. Associations will need to decide at what level these are reported to Board for example all arrears cases in excess of £1000?

This is not an exhaustive list. A checklist for developing a new Rent Collection Policy or updating an existing one is available. For more information see Policy Outline below.

Preventative Measures

“Prevention is always better than the cure” and this is never more apparent than in the area of managing rent collection. It is generally accepted that it will cost the Association less to collect rents due rather than to chase arrears. Social Landlords should have regard for their social responsibilities and make sure that tenants’ are aware of theirs. Early intervention with the tenant is imperative in creating a culture of social responsibility for both tenants and Social Landlords. Associations should:

• make tenants aware of their responsibilities as a tenant from the outset and maintain regular contact at the start and throughout the tenancy
• ensure that routine tenancy sign up procedures include the following:
  - information about the amount of rent and any service charges payable
  - the responsibility of tenants, including those receiving Housing benefit, for ensuring that rent payments are made punctually and regularly and the implications of failing to do this
  - dentify tenants who may be vulnerable and require additional information
  - the importance of informing the association and the Housing executive of any change in circumstances or changes which may affect their housing benefit entitlement
  - the procedures involved should they decide to terminate their tenancy in the future
  - comprehensive Data capture to include contact details for e.g. mobile phone numbers, next of kin information, etc
  - the range of methods available for rent payment and identifying the most appropriate method for the individual tenant
  - an explanation of the information on rent account statements
  - the offer to assist with completion of Housing Benefit applications or direct them to an external organisation which will provide this service
  - the offer to assess tenants income and calculate benefit entitlement (this can be done on the NIHE benefit calculator available on their website) or direct them to an external organisation which will provide this service
  - advice on how to get assistance with the costs of moving and/or setting up home
  - the range of support options for tenants experiencing difficulties in paying their rent.
• encourage tenants to inform landlords of any changes in their personal circumstances and any likelihood of them missing a repayment by creating a supportive environment where tenants feel able to report difficulties to their Landlord rather than avoiding them
• ensure staff are fully trained and skilled in order to provide an effective and efficient service to all tenants, with the possibility of introducing money advice training in order to improve prevention
• prevent arrears occurring by instilling a payment culture so that the payment of rent and other bills becomes a high priority for them, landlords should place a particular focus on new tenants
• provide a wide range of flexible, accessible and convenient options to the tenant for making rent payments
• regularly review their approach to the management of rent arrears and periodically assess how performance can be improved
• work alongside partner organisations in order to promote Best Practice in debt prevention and financial inclusion through conferences and working groups, etc
• consider subscribing to rent arrears/income management websites and resources
• consider providing/taking part in a Money Advice Market or roadshow which provide tenants with the ability to speak to a range of money advice organisations on in one place on an allocated date
• involve tenants/tenant groups in decisions/initiatives to be introduced around debt prevention
• consider introducing specialist staff to deal with new tenancies, allowing for focus to be made on ensuring this vulnerable time is monitored and advice and assistance is given to tenants to ensure they are aware of their responsibilities and that they maintain a regular payment schedule from the beginning of their tenancy

Where it is not possible for an association to provide the measures above, consideration should be given to outsourcing all or elements of these functions.

Publication/Promotion

Letters play an important part in the rent process; they are usually the first contact the tenant receives about arrears and are the only tool available when officers are unable to contact by phone or visit.
It is therefore essential that letters hit the mark. They need to be:

• clear
• concise
• jargon free
• only contain essential information

All letters and leaflets should also be available in a range of different formats to ensure all tenants can avail of the information on request i.e. different languages and different font size.

Consideration should also be given to Associations setting up a Housing Community Network Forum similar to that within the Northern Ireland Housing Executive who can assist with the development and quality assurance of letters and leaflets.

Tenant Handbooks
A key tool in communicating to tenants what will happen if they fall into arrears and how to get help is a clear, well presented and easily understood handbook. This handbook can be given to tenants at signup outlining:

• what to pay
• where to pay
• when to pay
• what will happen if payments are not made
• what to do if problems occur
• how to apply for Housing Benefit
• where to seek advice

Arrears Collection

Effective monitoring of rent collection by Associations should highlight immediately when a tenants payment arrangement breaks down. It is imperative that pursuance action is taken immediately to ensure that small amounts of arrears do not become larger. Key actions to effective arrears collection are:

• identifying a key resource within the Association responsible for managing arrears or outsource this function to another organisation
• ensuring all staff dealing with rent collection receive regular needs-based training
• issuing of appropriately worded and timely reminders to tenants after the first payment is missed to encourage them to make an immediate payment or to contact the Association to discuss any difficulties they may have with paying their rent
• following-up letters with personal contact with tenant either by telephone or visit to remove any confusion or misunderstanding and to open up the channels of communication to allow negotiation
• having early intervention with tenant to establish reasons why payment arrangements have broken down
• sign-posting tenants to organisations or support groups that can assist tenants with their difficulties
• establishing liaison points within NIHE to assist with Housing Benefit problems
• discussing and agreeing payment options with tenants, after considering their personal circumstances, which are reasonable, realistic and sustainable. Options should include paying a lump sum, paying by instalments or a combination of the two
• continual reviewing and monitoring of payment arrangements to ensure compliance and adjusting repayment amounts where appropriate
• monthly recording and reporting of all arrears action to Management and Board, highlighting any difficult cases and potential future action
• setting of local performance targets (taking into account regulatory performance targets) and reporting performance against these – see Rent Collection Targets below for more information
• benchmark performance with other Associations
• look towards organisations with Best Practice around arrears recovery

For more information see Checklist for developing rent collection procedures

Former Tenants Arrears

The association should also have a policy for dealing with former tenant arrears. This policy should include the methods the association will use to collect such arrears as well as factors that can be taken into account when writing off debts. The Association should always consider what is the most cost-effective action it can take to recover arrears from former tenants. Associations should consider outsourcing the function of debt collection. Any decision made to write off debt should be clearly documented and approved by the Board. Such decisions will be subject to scrutiny by the Inspection Team.

Legal Action

Associations should ensure that all reasonable steps have been exhausted before considering going down the legal route. If the tenant still fails to co-operate in reducing arrears Associations will be left with no option but to commence legal action to recover the debt. Associations should:

• consider what legal remedies are available and what is the most effective option i.e. small claims action, Magistrate Court, County Court action and Enforcement of Judgements Office
• continue to make attempts to negotiate an agreement with the tenant to repay arrears, alongside any legal action, and should continue to do so right through to enforcement
• never serve a tenant with a Notice Seeking Possession until the Association has established personal contact with the tenant or has exhausted all possible means of doing so
• retain records of all attempts to contact tenant as these may be required as evidence at a later date
• not serve a Notice Seeking Possession on tenants with outstanding Housing Benefit claims unless it is established beyond reasonable doubt that the tenant has failed to supply the necessary documentation or information or that the tenant has failed to pay the agreed personal contribution
• encourage tenants facing legal action to contact relevant Agencies who can provide advice and / or counselling debt services, as well as access to legal advice
• advise tenants that it is in their best interests to attend court hearings and encourage them to attend
• onsider if it is necessary to continue with legal proceedings if a repayment agreement has been reached prior to a court hearing.

Where legal remedies are sought a good checklist to follow for court would be:

• have you assessed income and given tenants advice when they applied?
• have you helped them claim benefits at sign-up?
• have you visited after four weeks to check whether everything is all right?
• have you contacted them as soon as any arrears were created?
• have you taken each step promptly and not let the arrears build up to an unmanageable amount?
• have you tried different forms of contact – by phone and visiting, as well as letters?
• after service of notice and before court, have you written several letters and visited on a weekly basis?
• have you a record of all stages and can a judge easily understand them?
• have tenants signed to record their agreement to every payment arrangement?
• have you got a reputation for efficiency and performance?

Write Off Of Bad Debts

It is inevitable that some debts will need to be written off by the Association. There can be a variety of reasons why this will happen. The Association must have a policy that clearly sets out its strategic objectives on the write off of bad debts. The Association should ensure that:

They have a realistic provision for bad debts
They have an authorised process for writing off arrears where continuing attempts at recovery are unlikely to be cost-effective

For more information on the major steps in the rent collection process see Suggested Rent Collection Procedures

Miscellaneous Guidance

Information for Housing Associations

The Northern Ireland Federation of Housing Associations has prepared guidance - ‘A Guide to Rent Arrears and Recovery Procedures for Registered Housing Associations’ which is a very useful guide which should be consulted when developing procedures.

Housing Associations may also find it helpful to look at good practice examples in all areas of rent collection and tenant services. Some examples of this are illustrated in the Chartered Institute of Housing publication ‘Financial Inclusion and Capability’ (examples in Appendix 1 are most suited to Northern Ireland).

Further guidance on good practice is provided in ‘Improving the Effectiveness of Rent Arrears Management – Good Practice Guidance’ which is a publication from the Office of the Deputy Prime Minister and ‘Managing Rent Arrears: Good Practice Briefing No 21’ published by the Chartered Institute of Housing.

Controlled Tenancies

The Department has made a new Determination which comes into operation from 24th March 2016, to give registered HAs the flexibility and discretion to apply rent increases not exceeding annual NIHE rent increases for tenants in Controlled Tenancies only. In effect, this provides that registered HAs may continue to apply rent increases to these tenancies in line with NIHE rent increases, or they may apply a lower rate of increase.

The Registered Housing Association (Controlled) Rents (Northern Ireland) Determination 2016 has been made by the Department with the consent of the Department of Finance and Personnel, and after consultation with the Northern Ireland Federation of Housing Associations. The 2016 Determination revokes the Registered Housing Association Rents (Northern Ireland) Determination 1992.

Information for Tenants

It is important to establish and maintain regular contact with tenants during the life of their tenancy. This is necessary to assist them in areas such as entitlement to benefits, budgeting their weekly finances etc. The Association should consider producing helpful booklets or leaflets on these areas.

Contact Points for Tenants & Housing Associations

Helpful contacts for tenants should also be made available. Examples of contact details which should be provided are:

• Citizens Advice Bureau
• Housing Rights

Incentive Schemes

It is acceptable to the Department for Associations to offer incentives to tenants for various reasons. These could include:

• changing the method of rent payment e.g. from cash to direct debit
• changing the frequency of rent payments e.g. from weekly to monthly
• paying rent in advance (maximum of one year in advance). In this instance, the Association should ensure that they have the procedures in place to account for this pre-payment of rent and have the necessary legal documentation in place to protect both the Association and the tenant (e.g. should the tenancy need to be terminated during the period of the prepayment). See also guidance on Money Laundering which is contained in the Finance Guide, Financial Reporting - External.

Housing Benefit Overpayments

Where overpayment of benefit paid directly to the Housing Association has been made, the Association can be held to be responsible. This means that NIHE will recoup the overpaid benefit directly from the Association. In some circumstances, the NIHE will deem the tenant to be solely responsible for the arrears and will reduce future Housing Benefit payments by up to £9.75 per week. This amount can be re-negotiated with the Northern Ireland Housing Executive to a lower amount.

If an Association notices that payments received are less than expected they will need to speak directly to the tenant as the NIHE would not be able to release any details due to confidentiality of information and data protection constraints. In this case the tenant will need to make up the shortfall to avoid building up normal arrears.

As the Association can be deemed to be responsible for the overpayment of benefits, systems should be put in place to avoid them. The Association should:

• encourage tenants to inform it of changes in circumstances which may affect their eligibility for benefits
• regularly contact tenants to confirm their continued eligibility for current benefits (as a minimum, contact should be made every six months)
• pass on to the NIHE in writing any information about changes of circumstances reported by tenants that may affect the payment of Housing Benefit
• ensure that there is early notification should a tenant leave a property without notifying the Association
• advise NIHE in writing as soon as possible after it is known that a property has been vacated

As Housing Benefit overpayments can not be taken into account when taking action against a tenant over arrears, Associations must always ensure that they can account for benefit overpayments separately from other rent arrears. To do this they could consider:

• including a note on the rent account detailing the current balance of the benefit overpayment which is outstanding
• maintaining a separate arrears account for the arrears caused by the Housing Benefit overpayment. This could be manual or on the existing computer system

When payments are received from the tenant, the Association should confirm which account these payments relate to and they should always be allocated to the correct account. If the tenant has not given instruction and the Association has been unable to get the information from them then they could consider allocating payments to the oldest debt first.

Policy Outline

1. policy aims
2. rent collection
3. arrears prevention
   - liaison with Housing Benefits Service
   - benefits, debt counselling and money advice
   - new tenant strategies
   - current tenants.
4. arrears collection / management
   - staff resources
   - IT
5. arrears recovery
   - early intervention
   - repayment arrangement
   - alternatives to legal action
   - prevention of eviction
   - former tenant arrears
6. legal and regulatory framework
7. performance monitoring
8. policy reviews

Rent Collection Targets

Given that Rent Collection is a fundamental process within any Housing Association the Department sets minimum targets to monitor each Association’s performance.
It should be noted that the income and arrears referred to in these rent collection targets is restricted to income and arrears from social housing activities.

Rent Collection Target

Housing Associations should collect 98% of the total rent receivable for the current financial year. The Department will calculate this target as follows:

• Total rent received less rent received for prior years rent arrears divided by Total rent receivable for the financial year

Rent Arrears Targets

As Housing Benefit is paid in arrears, and can unduly affect the level of rent arrears within a Housing Association, the Department will monitor two targets for rent arrears. The first target will be for Technical arrears relating to Housing Benefit payments directly from Northern Ireland Housing Executive (NIHE) and the second target for Non-technical arrears.

Technical Arrears Target

The Technical arrears target relates only to income and arrears which are receivable by the Housing Association directly from a public sector organisation, e.g. NIHE, Health Trusts etc. As Housing Benefit from NIHE is generally paid 4 weeks in arrears the target for Technical arrears is based on the percentage of arrears at year end that are more than 4 weeks old.

The total of Technical arrears which are more than 4 weeks old and are outstanding at year end should not exceed 1% of the total of Technical arrears at year end.

If a tenant has been suspended from Housing Benefit and the Association has not had confirmation within 4 weeks that they will be receiving Housing Benefit from the Housing Executive, the tenant should be moved to non technical arrears until the dispute is resolved.

Non-technical Arrears Target

The Non-technical arrears target relates to all income and arrears for which tenant’s rent is not received directly from a public sector organisation. The target for Non-technical arrears has been set at 5%. The Department will calculate this target as follows:

• Total non-technical arrears divided by Total income receivable less technical income receivable

It should be noted that technical income includes any income received or receivable by the Association directly from a public sector organisation in relation to their social housing activities, e.g. NIHE, Health Trusts etc. Non-technical income relates to all other monies received or receivable by the Association from social housing activities.