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Welfare Reform and Work Act – Rent Reductions – Important Update – March 2016

In our 12 February 2016 update on Rent Reductions (Welfare Reform & Work Bill – Feb 2016) we highlighted issues raised in the ‘ping-pong’ stage of the Welfare Reform & Work Bill about whether service charges were to be excluded or not when calculating the 1% rent reduction. We also raised concerns about the lack of a definitive list of exempted properties, most notably that student accommodation, intermediate/keyworker accommodation and PFI schemes were not referred to.

On 16th March 2016 the Bill became the Welfare Reform & Work Act 2016.

Yesterday the Government has issued useful Guidance which we recommend that you read in full. Link here:

https://www.gov.uk/guidance/welfare-reform-and-work-act-2016-social-rent-reduction

The Guidance confirms:

  • For social rent properties the reduction applies to the rent element and NOT to service charges
  • For most Affordable Rent properties the reduction applies to the total amount inclusive of service charge
  • Student accommodation, intermediate/keyworker accommodation, PFI schemes and specialised supported housing (that fit certain criteria) have full exemption
  • All other supported housing (i.e. that is not specialised supported housing), almshouses and fully mutual co-ops are excepted from the rent reduction requirements for the first relevant year, but restricted to any rent increase of CPI + 1%.

The relevant Regulations that deal with these exemptions and the provisions relating to rent and service charge are The Social Housing Rents (Exceptions and Miscellaneous Provisions) Regulations 2016 which can be found here: http://www.legislation.gov.uk/uksi/2016/390/made/data.pdf

Regulation 16 deals with whether service charges are to be included or not for calculating rent reductions. That Regulation together with Section 33 of the Act, now make it clear that, for social rent properties, the reduction applies to the rent element only and it is not linked to whether the tenancy agreement defines ‘rent’ as inclusive of service charge or not.

If you have any further queries, please do not hesitate to contact the Property Disputes Team.

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