Suspicious Minds: Contrivance in Housing Benefit. Paul Key explains a landmark case.

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1 and legislative instruments that they may be open to interpretation, when applied to specific sets of circumstances. The regulations concerning contrivance and commerciality seem, however, to be particularly vague in crucial areas and this has led to a situation where interpretation has tended towards the imaginative, not to say the fanciful, on occasion. Suspicious Minds: Contrivance in Housing Benefit. Paul Key explains a landmark case. Housing Benefit decision makers are turning more frequently to querying rent claims on the basis of non-liability or in other words contrivance. Some confusion has existed for a long time over the issue of contrivance as it is defined in the Housing Benefit Regulations. It is in the nature of regulations This article seeks to make some sense of these particular regulations following an appeal case decided by Commissioner Edward Jacobs on 27 th September 2007 which can be found in full here. A local Tribunal had dismissed a case where the local authority had claimed that a contrivance had taken place. Commissioner Jacobs agreed with the Chairman of the Tribunal and dismissed the appeal. This is seen as a landmark case which, in great detail, describes an effective approach to issues concerning contrivance. This article will also briefly discuss the issue of commerciality, a generally much less fraught area. I have not discussed the specific details of the circumstances of the case in this article. Being limited to space this piece is simply concerned to inform readers about the interpretation of the regulations. Support Solutions Revenue Optimisation Programme, presently involved with over 70 projects with

2 supported housing providers across Britain, is in the business of reviewing housing revenue charges and negotiating revised evidence-based housing charges with Housing Benefit departments. These negotiations reflect the need to achieve full recovery for housing and housing associated costs in an environment where a number of eligible cost elements have recently been reverse-shunted back from Supporting People Grant allocations. The zero-based analysis used in this process has also uncovered areas where traditional approaches to service charges have failed to capture not only what is actually being spent, but also elements of service improvement which are eligible. Whilst colleagues in the Housing Benefit system may well have breathed a collective sigh of relief when all of the care and support costs were finally removed from Housing Benefit in THB and subsequent SP formulations from , the present retraction of the SP budget has prompted an intense scrutiny of the increasing numbers of grey areas to make sure that Housing Benefit does still pay for costs that are actually eligible, even though some of these may have been claimed temporarily from elsewhere. Whilst providers are increasing their scrutiny it has become clear that Housing Benefit managers are also increasing theirs. Whilst this is something that we are very comfortable with, as it results in clarity and sustainable rent structures, it does, as a by-product, create the Elvis Presley factor of suspicious minds. Faced with an unarguable set of evidence-based housing charges, yet strongly motivated to resist increased claims based on costs not previously included, Housing Benefit decision makers are turning more frequently to querying rent claims on the basis of non-liability or in other words contrivance. There is considerable evidence that this approach is usually entirely tentative as there do not appear to be any recent cases reported, other than the Tribunal decision leading to appeal in Jacobs which we are dealing with here, where a Council has succeeded in following such a case through successfully. Before going into the detail of Jacobs it is worth mentioning the impact an accusation of contrivance may have on the party perceived to be doing the contriving. In relation to a claim for housing benefit, being accused of contrivance may feel as if it is tantamount to an accusation of fraud. This is perceived to be a much more serious matter than, for instance, an argument about whether a given level of rent is reasonable. What is reasonable is a matter for healthy debate and discussion and the introduction

3 and examination of evidence. Being accused of creating a contrivance implies being guilty of purposeful deception, possibly resulting in legal censure and punishment! This approach is powerful and can be bruising for people who have not done anything wrong. It is our view that this approach should only be used where there is clear evidence of abuse of the system. It is not possible to know what is in the minds of local authority housing benefit staff when they decide to follow this approach. Well-evidenced lack of success in ever proving contrivance suggests that there may sometimes be a hope on their part, if not an expectation, that the moral panic impact of the accusation will have the effect of the claim being withdrawn before the contrivance facts can be tested. This, however, is entirely a personal view. Housing Benefit regulations come under the umbrella of the Social Security Contributions and Benefits Act Under Regulation 9(1) of the 2006 amendments which consolidated the 1987 regulations it states: a person who is liable to make payments in respect of a dwelling shall be treated as if he were not so liable where.. (1) the appropriate authority is satisfied that the liability was created to take advantage of the Housing Benefit scheme. In his analysis of the legislation Commissioner Jacobs immediately fastens on to the critical issue of the meaning of take advantage of the scheme which is agreed not to mean use the scheme. He reasons that if using the scheme was the accepted broad interpretation of the regulation then there would be no market for tenants who required public financial help to pay for their housing. As a DWP benefit, the Housing Benefit Scheme is meant to be used! He also agrees that taking advantage of the HB scheme does not mean making the most of the opportunities it presents, citing the case of a landlord who acquires better accommodation and charges a higher rent in order to improve his income, and to improve the quality of the housing for his tenant. The landlord has taken advantage of the scheme to help finance the purchase of a better investment, and the tenant has taken advantage of it to improve his accommodation standards, both at public cost. It is suggested that this arrangement is a proper use of the HB scheme, and should not attract the interest of suspicious minds under regulation 9. Jacobs confirms that :

4 .it is not the function of Regulation 9( 1 )(1) to impede the proper operation of the private rented housing sector My general concern about the way that regulation 9 has been used is dealt with in the discussion in the report of this case. Commissioner Jacobs points out that there are, in fact, a number of mechanisms which the local authority can use to control the amount of money paid out in housing benefit, which are entirely unrelated to Regulation 9. It may happen that in certain circumstances these mechanisms fail to catch rent levels which the authority feels are high. This does not mean that regulation 9 can be brought in to play as a sort of fallback or failsafe. There has to be an abuse of the system, or a clear case of noncommerciality, and this has to be proven by the authority, should the tenant/landlord wish to appeal against a decision not to pay the rent charged. An example cited is a landlord who sets a rent under Regulation 13 where the higher rent level can not be seen as taking advantage of the HB system. This can only be dealt with through an assessment of what is reasonable in the particular circumstances. Regulation 9 is more appropriately considered as a mechanism for exclusion from the system, rather than a mechanism for rent control. It is not the function of regulation 9 to fill the gaps that might exist in rent control mechanisms. The report continues : It is permissible for landlords so to organize their affairs that they maximize the amounts payable by way of housing benefit, provided they do so in a way that does not take advantage of the scheme as those words have been interpreted by the courts Because of the scarcity of successful cases where contrivance has been proved we are thrown back on the case of R v Manchester City Council ex parte Baragrove Properties (1991) 23 HLR 337 to try and judge what an abuse of the system might look like. There do need to be some caveats in this case as regulation 9, or at least it s earlier equivalent, was substantially altered in 1999 which has rendered Baragrove less reliable. In this particular case the landlord in question set out to provide housing and support only to individuals with the very highest level of needs and restricted the letting of tenancies to anyone but that group. The house, and the connected housing support services, were not however in any way adapted or specialized. This was deemed to be an abuse.

5 In Jacobs, however, the report suggests that, while the landlords in Baragrove were effectively rigging the market, a landlord such as the one under discussion in this case, would not be thought of as taking advantage of the scheme if he made a decision to let to a specific individual because he knew he would get a higher return, nor if there were a general plan to provide adapted accommodation and/or specialized support to people with a high level of needs. Paragraph 41 of the report is worth re-printing in it s entirety as a useful summary, and as a touchstone for all situations where there is any doubt about abuse of the Housing Benefit scheme. The tribunal considered the voluminous evidence before it, which went into the financial and commercial considerations in what in my experience was a wholly unprecedented way. It came to the conclusion that everything had been organized for proper commercial motives. The size of the charges and the profit that would result were relevant under regulation 9( 1 )(1) only in so far as they showed abuse. The tribunal considered on the evidence as a whole that there was no abuse. There is no objection to the making of a profit from the housing benefit scheme. If there were, there would be no market for tenants who required public financial support for their housing costs. I consider that the local authority s real objection is that the amount of benefit to which the claimants would be entitled exceeded what is considered appropriate. The appropriateness of a rent or charge is fixed by the market, in so far as there is one, and is subject to controls within the housing benefit scheme. It was not necessarily an abuse of the scheme if (1) the arrangements in this case were not caught by those controls or (2) the landlord was aware of that. A landlord may so arrange its affairs to take advantage of the opportunities presented by the scheme. Doing so of itself is not an abuse. The publication and dissemination of this Commissioners decision has already had at least one immediate effect. In a case in the South-East of England a Housing Benefit team had started to talk about contrivance in relation to an evidence-based claim from a number of tenants of a specialized housing and support provider, themselves supported by Support Solutions. This had come about because the service, originally a for-profit organization, had reorganised along non-profit lines in order to secure the real costs of the housing provided, rather than the limited reference rent levels which had been available up to October in their old organizational entity. This is very similar to the actual circumstances of the Jacobs case.

6 As soon as the contrivance issue was mentioned, a copy of the Jacobs report was forwarded to housing benefit colleagues, and the matter was immediately dropped with the full rents now having been agreed. A final issue to consider is that of non-commerciality, which is linked up with Regulation 9. Noncommerciality may be construed where there is not a legal tenancy, or any liability on occupiers of a property to pay rent. A typical situation where this may hold true is in some communities run by religious organizations where people live rent-free, but perhaps complete work for the upkeep of the community. Subsequent claims for Housing Benefit would fail until a legally viable commercial relationship and tenancy could be put in place, a situation which many organizations of this type might resist. This fits in to the context of exclusion from the Housing Benefit scheme, rather than as a mechanism of rent control. A very recent case of this type was reported to me in the Doncaster area. Another cause where rents are refused on the grounds of non-commerciality is where the tenant s landlord is a close relative who lives on the same premises. Cases related to noncommerciality are much more common than cases where contrivance is used. As Elvis said we can t go on together, with suspicious minds.. and I think that this must now be the position with our colleagues in the Housing Benefit service, following the clarification provided in this case. We support the detection and removal of abuse in the Housing Benefit system, and advise all of the organizations we work with how to avoid it. We musts at all costs, however, move away from the inappropriate use of regulation 9 as it has been too easy for unfounded suspicion to lead to delay for vulnerable people and to miscommunication as well as false accusations. I would be very interested in hearing from any readers who have had experience of contrivance issues in their work. paul@supportsolutions.co.uk