Some landlords are happy to let their properties to people in receipt of benefits or on low incomes. Others run a mile. It is an individual decision. Before deciding to let your property to a tenant in receipt of benefits, do some homework. For example, what is the local economy like? Is there a university nearby? Is the property in an area which has good transport links to big cities and therefore attractive to commuters? If your property is in area where wages are low and the local economy is depressed, you may have no choice but to let to someone who needs to claim Housing Benefit. Be realistic about your property. If it is shabby, will you get the tenant you really want?

From April 2008, Housing Benefit will be replaced in the private rented sector by a Local Housing Allowance. Private tenants whose tenancies are protected under the Rent Act will not be affected. The Local Housing Allowance is currently being tested in a number of areas in the UK. The main differences between the current system and the new one are:

• The allowance paid is fixed depending on the tenants circumstances and is not based on the rent you charge.
• The allowance will be paid to the tenant, and not the landlord

Many landlords will only take tenants on housing benefit if the payments are paid directly to them. Therefore, many landlords will be concerned if direct payments stop being made to them, in particular if you have been waiting months for the first cheque. If any further information comes to light, we will put it on the website.

However, in the meantime, if your tenant is going to claim Housing Benefit, here is some information you need to know:

The claim for Housing Benefit is your tenants and not yours. The local authority does not have to discuss the claim with you unless your tenant gives permission for it to do so. Therefore, start by getting your tenant to sign a letter which gives you permission to speak to the local council about the claim.

The council does not have to pay you directly, unless your tenant owes you more than two months rent. If you want the money to come to you, you need to get your tenant to agree that the benefit can be paid to you from the start. There will normally be a form that you and the tenant complete and sign which is a declaration about the rent charged. On this form, there is often a box to tick which states who the benefit should be paid to.

The local council must pay benefit according to the size of the property and the number of occupiers in it. If you rent a three bedroom house to a single person on benefit, the local authority will restrict the benefit to what it would pay for a one bedroom property. Therefore, make sure that the accommodation is the correct size for the household. Children of the same sex under the age of 16 are considered to be able to share a bedroom. Children under the age of 10 of the opposite sex are considered to be able to share a bedroom under the regulations.

There are special rules which relate to single people under the age of 25. Basically, they will only be paid the amount that the council would normally pay for one room in a property or a bedsit. Therefore, if you rent a self-contained property to a younger person, they may have difficulty paying the rent if they are on benefit. Students are not entitled to Housing Benefit except in very limited circumstances.

In deciding what benefit to pay, the council takes the local rent levels into consideration. The council will ask an independent rent officer to decide what a reasonable rent is for the property. The council must use the rent officer's figure when it assesses the claim. If you want £100 per week and the rent officer decides that £80 per week is reasonable, the council must use the £80 figure in the assessment. Any shortfall will have to be paid by the tenant. The tenant can claim extra help but it is limited and it can only be paid for a short period.

Before taking on a tenancy, you and the prospective tenant can get a "pre-tenancy determination" from the local council on what rent figure they will use in the assessment. You both need to sign a form and return it to the local council and you may need to let the rent officer view the property. The local council will write to you shortly after to tell you what rent figure they will use in their assessment. You can then decide if you should let to a tenant who is going to claim Housing Benefit.

Any decision made by the rent officer lasts for 12 months. This includes any pre-tenancy determination as described above. Therefore, if you want to increase the rent after your tenant has been in the property for six months, you can, but the local council cannot take the increase into account.

There are normally two issues which deter landlords from letting to tenants in receipt of Housing Benefit. The poor administration of the scheme by the local council and overpayments. The performance of councils across the UK varies with some administering the scheme very well and others very poorly. If you need advice on dealing with the local council, please contact us for further advice.

Overpayments have always been controversial for landlords because the rules allow the local council to recover the overpayment from whoever received the benefit, provided it is reasonable and all factors have been taken into account. There is some discretion in the regulations and if you feel that you should not have to repay benefit, contact us for further advice.