Housing (Scotland) Act 2001 and 2010: repossession guidance for social landlords

3. PRE-ACTION REQUIREMENTS

Requirement to provide clear information about the tenancy agreement and outstanding financial obligations

20. Section 14A(2) of the 2001 Act requires landlords to give tenants clear information about:

(a) the terms of the tenancy agreement; and

(b) outstanding rent and any other outstanding financial obligation of the tenancy.

21. Article 2(1) of the PAR Order says that in giving information to tenants, landlords must make sure that they are given:

(a) a description of the rent and any other financial obligations of the tenant under the tenancy agreement; and

(b) information about the amount due to the landlord under the tenancy agreement, which must be broken down so as to show -

(i) the total amount of outstanding rent and of any other outstanding financial obligations of the tenancy; and
(ii) a description of any charges which the landlord anticipates will be incurred if the arrears of rent or any other financial obligation of the tenancy are not paid.

22. Article 2(2) of the PAR order says that "charges" in Article 2(1)(b)(ii) means:

• any future charges resulting from arrears of rent or any other outstanding financial obligation of the tenancy that are detailed in the tenancy agreement; and
• any illustrative indication of legal expenses that tenants may incur from such obligations.

The illustrative indication of legal expenses allows landlords to include any charges for legal expenses allowed for under the Scottish Secure Tenancy Agreement. The court assesses these expenses. At this stage landlords will not know the court's assessment of expenses, and these would depend on how any action proceeds, but landlords may choose to give tenants illustrative information about costs that tenants have had to pay in similar cases, where that information is available. The intention is for the tenant to receive an indication of the likely legal expenses they may incur if court action as a result of rent arrears becomes necessary.

23. Article 2(3) states that landlords must give tenants the information required by section 14A(2) of the 2001 Act and the Order as soon as a landlord considers reasonably practicable after a tenant enters into arrears.

24. 'Other financial obligations of the tenancy' means all financial commitments in the tenant's tenancy agreement apart from rent. They may, for example, include service charges or payments towards insurance.

25. The statement of the amount of unpaid rent and other financial obligations of the tenancy must give the tenant a total figure for the amount that they owe.

26. It would be helpful if, wherever possible, landlords can provide tenants with a breakdown of the total figure so that they can clearly understand how the arrears have accumulated. This breakdown should include the amount housing benefit covers wherever practicable. It would also be helpful if landlords explained to tenants how much they need to pay towards their rent, and when, over and above any housing benefit entitlement.

27. In meeting the requirements of section 14A(2) of the 2001 Act, landlords must make sure that the information they give to tenants is clear, not misleading and easily understandable. Landlords should aim to give tenants the information they need in plain language and in a format that is accessible.

28. Not all tenants will have English as a first language, which may make it difficult for them to access information in standard formats. Some tenants may have literacy problems, visual impairments or learning difficulties. Where landlords know that tenants have particular needs they should take account of these needs. The aim is to make sure that as far as possible tenants understand their financial position.

Requirement to make reasonable efforts to provide tenants with advice and assistance on eligibility for Housing Benefit and other types of financial assistance

29. Section 14A(3) of the 2001 Act requires landlords to make reasonable efforts to provide tenants with help and advice on their eligibility to receive:

(a) housing benefit; and

(b) other types of financial assistance (for example, other benefits or grants).

30. Article 3 of the PAR Order says that in providing such help and advice to tenants, landlords must:

(a) make reasonable efforts to contact tenants in order to identify whether they need advice and assistance on their eligibility to receive Housing Benefit and other types of financial assistance;

(b) give tenants details of persons or bodies who will be able to provide tenants with such advice and assistance; and

(c) give tenants reasonable assistance with claiming housing benefit, if the tenant asks them to do so.

Reasonable efforts

31. All contact with tenants while seeking to resolve the arrears should be on the basis of this guidance.

32. The legislation does not set out what reasonable efforts means and what is needed will differ depending on the circumstances of each case. In the end it will be for the courts to decide whether a landlord's efforts are reasonable.

33. There may be occasions when landlords make every effort but tenants refuse or fail to respond. In this case landlords should record brief details and dates of the help offered and the lack of engagement on the part of tenants. The pre-action requirements require landlords to show the efforts that they have made.

34. In meeting the requirements of section 14A(3) of the 2001 Act landlords must make reasonable efforts to give tenants help and advice. The method by which landlords give this advice is not set in legislation and, although it could be face to face, it could include contact with tenants in writing, by email by telephone or by text message. Landlords should take account of tenants' preferences on how they wish landlords to contact them. Landlords should consider a range of methods and not rely on a single approach.

35. Where landlords know that tenants have support needs they should also consider those needs when preparing for giving help and advice, taking into account the tenant's health and social care needs. If landlords are aware that tenants have difficulty in reading or understanding information, landlords should take reasonable steps to make sure that they have appropriately communicated the information in ways that tenants can understand. If tenants have difficulty in engaging directly with the landlord, for example, this could include communicating via a tenant's support worker, where there is one known to be working with the tenant and the tenant is happy for the landlord to talk about matters with the support worker.

36. Landlords should take particular care if tenants are under 18 or are particularly vulnerable. In cases where tenants are vulnerable landlords should, at an early stage, consider whether tenants have the mental capacity to understand their position. The Mental Health (Care and Treatment) (Scotland) Act 2003 puts a legal duty on some landlords to provide the right of access to independent advocacy to any person with a mental disorder. Where tenants have an advocate or someone with an appointed power of attorney landlords should include them in all communications. This would be good practice for all landlords, regardless of whether they are required to do it.

37. Wherever possible landlords should consider arranging a face to face meeting with tenants to talk about what help the tenant may already have sought and what further help they may need. For tenants in certain circumstances this could include arranging a home visit.

38. A single unsuccessful attempt to communicate with tenants is unlikely to be enough for landlords to show that they have made reasonable efforts to provide tenants with help and advice. Landlords will wish to bear in mind that they will have to give tenants information on the reasonable efforts they have made to contact them in any notice served on the tenant and may also have to prove to the court the reasonable efforts they have made. Landlords should record brief details of each attempt made, including the date(s) and the method used.

Advice and Assistance

39. Section 14A(3) of the 2001 Act requires landlords to make reasonable efforts to give tenants advice and assistance. This means that landlords must do more than give tenants advice, they must also help them. In doing this the PAR Order requires landlords to give tenants details of appropriate specialists.

40. Persons or bodies who will be able to give help and advice include:

• In-house income maximisation officers, money advice specialists or welfare benefits officers;
• Citizens Advice Bureaux;
• Welfare rights organisations; or
• Other local advice agencies.

41. Providing tenants with details of such persons or bodies includes giving them contact details for the organisation or individual, including their telephone, email and website. It will usually be for the tenant then to decide whether to approach any person or body for help, and if so for the tenant to decide which they consult.

42. Where tenants or their representatives have indicated that tenants need help to make contact with appropriate specialists, landlords could go further and refer tenants to a relevant person or body. Referral is where a landlord contacts the appropriate person or body for the tenant. Landlords must get tenants' consent in writing before making any referral. It would be good practice to also get the tenants' consent to find out the outcome of the referral.

43. If tenants ask landlords for help with a housing benefit application, landlords should do what they can to assist. This may include such things as helping tenants to fill in the necessary forms, helping to gather the necessary evidence to support the application or referral to an appropriate specialist.

Requirement to provide information in relation to the management of debt

44. Section 14A(4) of the 2001 Act requires landlords to give tenants information about sources of help and advice about the management of debt. While section 14A(3) focuses on providing tenants with support on their eligibility for benefits, section 14A(4) focuses more broadly on debt and financial management. This could, for example, include advice on household budgeting, maximising income, reducing debt and consolidating debts.

45. Landlords should make sure that they only give tenants details of free and independent sources of debt help and advice. The persons or bodies in paragraph 40, may be appropriate where they are in place locally and offer help and advice on debt management. Again, it will generally be for the tenant to decide whether to approach any person or body for help, and if so for the tenant to decide which they consult, but in appropriate cases the landlord could go further and refer.

Requirement to make reasonable efforts to agree a reasonable repayment plan

46. Section 14A(5) of the 2001 Act requires landlords to make reasonable efforts to agree with tenants a reasonable plan for future payments to the landlord. The plan has to include:

• future payments of rent; and
• payments towards the outstanding rent and other outstanding financial obligations of the tenancy.

47. Article 4(1) of the PAR Order says that in making reasonable efforts to agree a reasonable payment plan, landlords must:

(a) make prompt and reasonable attempts to contact tenants to talk about the arrears so that they can agree a plan for future payments of rent and repayment of the arrears and any other unpaid financial obligations of the tenancy;

(b) encourage tenants to give landlords all relevant information on their financial circumstances;

(c) advise tenants to seek help from an appropriate debt advice agency where tenants make landlords aware that they have other debts as well as those related to the tenancy;

(d) provide tenants with details of any plan the landlord proposes, set out in such a way as to allow tenants to consider the proposal;

(e) allow tenants time to consider any plan the landlord proposes;

(f) consider the affordability of any plan for tenants taking into account tenants' personal and financial circumstances where the landlord knows them; and

(g) give tenants a copy of any plan they have agreed with landlord.

48. Article 4(2) of the PAR Order says that if the landlord rejects the payment plan proposed by the tenant, the landlord must provide reasons for rejecting the plan in writing.

49. The guidance under 14A(3) of the 2001 Act on ' reasonable efforts' and ' advice and assistance' equally apply to this requirement to make reasonable efforts to agree a reasonable payment plan.

50. Landlords should tell tenants that any debt agency they contact about their debts should be one which offers free and independent advice.

51. The aim is to arrive at a payment plan which is affordable and sustainable for tenants. The emphasis for landlords should be on considering tenants' total income and expenditure. Landlords have to encourage tenants to give them all relevant information on the tenants' financial circumstances. This involves landlords:

• explaining to tenants the need for the information;
• asking them to be open and honest about their financial circumstances; and
• being clear about how they will use the information to draw up a plan that the tenant should be able to afford and keep up payments on.

52. Landlords can only make decisions on known information. Where a financial statement has been drawn up by a Citizen's Advice Bureau, money advice agency or similar organisation landlords should take this into account. Where tenants receive welfare benefits and their rent is being met by housing benefit, an example of an affordable and sustainable plan for tenants may be on-going direct deductions towards the rent arrears from welfare benefits.

53. Where a payment plan would be affordable and sustainable for tenants, but landlords do not consider it reasonable, landlords may have to explain their reasons for this to the court.

54. It must be clear to tenants that the payment plan is based on:

• future rent payments;
• repayment of the total amount of arrears due as set out in the statement to tenants under Article 2 of the PAR Order;
• where appropriate, taking into account the amount of any housing benefit and/or arrears of housing benefit that it has been decided will be paid; and
• where appropriate, taking into account the amount of any other income that it has been decided will be paid.

55. Where claims for housing benefit and/or payment for arrears of housing benefit have not been decided, the housing benefit paid is not enough, or where tenants are taking other steps to address the arrears then there are two choices open to landlords around agreeing a reasonable repayment plan:

• Estimate the amount of housing benefit; arrears of housing benefit; or other sums that tenants indicate they are due and that are likely to be paid. Then take these estimated figures into account when determining the reasonable payment plan. The risk with this approach is that the estimated sums do not materialise and landlords and tenants would have to renegotiate a reasonable payment plan with increased payments for the tenant or a longer period until the arrears have been paid off; or
• Ignore any tenants' income from benefits or other sources that are not yet known and base the repayment plan only on known costs. Take additional income into account when tenants pay them towards the arrears. This approach is likely to result in renegotiating a revised payment plan with lower payments for tenants, or a shorter period for repayment, once their financial situation improves.

56. The approach taken by landlords may depend on the circumstances of each case. Whatever option is used tenants must clearly understand the payment plan they are agreeing, what has been included and what is not and the possibilities around future revisions to the payment plan.

57. Landlords and tenants should try to agree affordable sums for tenants to pay towards arrears, based upon tenants' income and expenditure. The repayment arrangement may involve payment of regular instalments in a frequency agreeable to both parties but could also include paying the arrears in full. The duration of the payment plan will depend on the level of arrears and the affordability for tenants to repay the arrears.

58. If landlords and tenants cannot agree affordable sums for tenants to pay towards the arrears, landlords should make all reasonable efforts to try to resolve the situation before serving a notice where all of the other pre-action requirements have been met (the guidance under 14(A)(3) of the 2001 Act on ' reasonable efforts' equally applies to this requirement to make reasonable efforts to agree a reasonable payment plan). Where the landlord cannot accept a plan proposed by the tenant, article 4(2) of the PAR Order requires the landlord to give the tenant, in writing, reasons why the landlord has rejected the plan.

Requirement to not serve a notice

59. Section 14(2A)(a) prevents landlords from serving a notice until they have complied with all of the pre-action requirements. Section 14A(6) of the 2001 Act in particular prevents landlords from serving a notice if:

(a) an application for housing benefit has been made but not yet determined and it is, in the opinion of the landlord, likely to result in the benefit being paid at a level allowing tenants to pay, or reduce by an amount acceptable to landlords, the outstanding rent and any other outstanding financial obligation of the tenancy;

(b) tenants are taking other steps which, in the opinion of landlords, are likely to result in the payment to the landlord within a reasonable time of the outstanding rent and any other outstanding financial obligation of the tenancy; or

(c) tenants are complying with the terms of agreed payment plans.

Housing Benefit

60. Landlords must consider any application for housing benefit, this will include:

• a new claim for housing benefit;
• a claim for housing benefit after a change of circumstances;
• an application that has been made but not yet decided;
• an application for backdating of a new claim or change of circumstances;
• an application for reconsideration of a decision; or
• an appeal.

61. Article 5 of the PAR Order says that in finding out the position of a housing benefit application, landlords must encourage tenants who have made a claim for housing benefit to give their written authority to allow their landlord to talk about their application with relevant housing benefit staff. These staff are Housing Benefit staff in the local authority that the tenant has made their Housing Benefit application to. This involves landlords:

• explaining to tenants the need for information on their housing benefit claim;
• asking them for written authority; and
• being clear that they will use this authority to try to get information on the likely outcome of their housing benefit claim.

62. The 'Guidance for local authorities on the use of social security data' published by the Department for Work and Pensions in August 2010 includes an example of a customer consent form in Annex A that landlords may find useful.

63. If written authority is given, landlords must take all reasonable steps to:

(a) confirm that a housing benefit application has been made;

(b) find out when a decision on the application is likely to be made;

(c) find out whether the tenant has given all the necessary evidence and verification to support the claim, or is within the allowed period for giving such evidence or verification; and

(d) find out the likely outcome of the housing benefit application.

64. Reasonable steps could include one or more of the following, as well as any expertise landlords have in housing benefit matters:

• seeking advice from housing benefit officers;
• receiving electronic transfer of information from housing benefit officers;
• seeking advice from other benefits specialists/advisers; and
• using online housing benefit calculators.

65. Where tenants haven't given all the necessary evidence and verification to support their application for housing benefit landlords could do what they can to help tenants progress their housing benefit application, where appropriate. This could include making tenants aware of the evidence or verification housing benefit staff need or helping tenants to gather the correct evidence or verification.

66. Landlords must not contact housing benefit staff about an application without written authority from tenants to do so. Article 5 of the PAR Order also says that if tenants do not give landlords written authority landlords must take such steps as they can to establish the likely outcome of the housing benefit application. These may include, as well as any expertise landlords have in housing benefit matters:

• seeking general advice from housing benefit officers;
• seeking advice from other benefits specialists/advisers; and
• using online housing benefit calculators.

67. Under Article 5, landlords must consider the results of the steps taken in arriving at a decision as to the likely effect that the decision on the housing benefit claim will have on the unpaid rent and any other financial obligations of the tenancy.

68. Landlords must consider whether the likely amount to be paid would cut the arrears to an amount acceptable to them. In making that decision landlords should consider the remaining amount of arrears and the sums affordable to tenants for future payment towards those arrears. If the amount of arrears remaining after taking into account the housing benefit application is not acceptable to the landlord, the landlord must be able to explain that decision to the tenant. Landlords should also bear in mind that they may have to justify their opinion to the court.

69. When considering the likely outcome of the housing benefit application on the arrears, landlords may discover that the Department for Work and Pensions will reduce tenants' housing benefit entitlement due to earlier housing benefit overpayments. In such cases, landlords could do what they can to assist tenants to maximise the amount of housing benefit paid towards the rent, for example, by assisting tenants to ask for reduced rate housing benefit overpayment deductions where this may be possible.

70. Where landlords have made reasonable efforts to meet the steps set out in Article 5 and are unable to arrive at a decision as to the likely outcome of a housing benefit application, landlords must make reasonable efforts to agree a plan in line with section 14A(5) of the 2001 Act and article 4 of the PAR Order.

Other steps

71. Article 6 of the PAR Order says that in considering the other steps tenants are taking to result in payment to landlords within a reasonable time, landlords must:

(a) try to find out whether tenants are taking other steps to pay the unpaid rent and other outstanding financial obligations of the tenancy, over and above their ongoing rental obligations;

(b) consider all evidence available to them of steps taken by tenants to pay the unpaid rent and other outstanding financial obligations of the tenancy, including evidence of a claim for benefits, grants or lump sum payments due; and

(c) assess whether any of the steps being taken by the tenant under (a) and (b) are likely to result in payment within a reasonable time of the unpaid arrears and other outstanding financial obligations of the tenancy.

72. Landlords will only be able to reach an opinion based on information tenants give them. It is therefore important that landlords encourage tenants to give them information on any benefit claims or other sources of income that they are expecting to receive, including income from property sales or employment (including annual bonus payments of salary).

73. Landlords must arrive at an opinion on whether the other steps tenants are taking are likely to result in payment within a reasonable time.

• Where the step involves claims for monies from third parties evidence that may inform that opinion includes:
  - evidence that tenants have given all of the necessary information and evidence needed to process the claim, application or payment;
  - evidence that tenants can reasonably expect payment; and
  - evidence that tenants' claims, applications or payments have been refused.
• Where tenants believe that other sums are due to them, landlords may take into account the expected source of those sums and consider any evidence tenants have that those sums are due in arriving at their opinion.

74. Landlords must also consider whether tenants are likely to make payment within a reasonable time. How much time landlords consider reasonable is a matter for them. Landlords should bear in mind that they should be able to explain to tenants why they do not feel that tenants are likely to make payment within a timescale that is reasonable to them, if that is the case. Landlords should also bear in mind that they may have to justify their opinion to the court.

75. If tenants are taking other steps which, in the opinion of the landlord, are likely to result in tenants making payment of the arrears to them within a reasonable time then landlords must not serve a notice on tenants. If any of the arrears remain outstanding once tenants have paid any monies arising from these other steps then the legislation does not prevent landlords from serving a notice so long as they have met all of the pre-action requirements. This includes the landlord taking reasonable efforts to agree a reasonable plan for future payments for the remaining arrears.

Compliance with agreed repayment plan

76. Article 7 of the PAR Order says that in considering whether tenants are complying with the terms of an agreed payment plan, landlords must:

(a) promptly take reasonable steps to establish the reason for any default or shortfall in respect of an agreed payment;

(b) consider whether the agreed plan continues to be affordable for tenants, taking into account any information of tenants' personal and financial circumstances known to landlords;

(c) review the agreed plan where landlords consider it is no longer affordable for tenants;

(d) allow tenants reasonable time to -

(i) make repayments within the terms of the agreed plan, including repayment of any shortfall or missed payment; or
(ii) enter into a new plan.

77. Landlords should, immediately after an agreed payment plan is not kept to, contact tenants to find out why this was the case. Where there has been a significant change of circumstances impacting on tenants' ability to meet the repayment arrangements or landlords consider there are other reasons to again look at the payment level, landlords should consider whether a change to the payment level is needed.

78. If landlords consider that the payment level in the agreed plan remains appropriate, then landlords must give tenants a reasonable time to comply with the existing agreement. It is up to landlords to decide what time limit would be appropriate, bearing in mind any history of missed payments, the amount of payment missed and the affordability for tenants to meet the shortfall. Tenants are meeting the terms of an agreed payment plan if they remedy any payment shortfall within the period set by landlords.

79. If, after consideration of the reason why the payment shortfall has arisen, landlords consider the circumstances were outwith the tenant's control and that the payment level in the agreed payment plan is no longer appropriate, they should make reasonable efforts to agree a new reasonable plan for future payments. The guidance for section 14A(5) of the 2001 Act then applies.

Requirement for Registered Social Landlords to encourage the tenant to contact their local authority

80. Section 14A(7) of the 2001 Act requires landlords to encourage tenants to contact their local authority (where the landlord is not the local authority itself). This is so that the local authority can give tenants advice on what their entitlement to housing may be should they become homeless and to give them housing options advice. Landlords could do this by issuing a letter to tenants which explains the potential benefits of contacting the local authority at an early stage.