Former Tenants Arrears Write Off to 31 March 2021
North Lanarkshire Council · 15 February 2023
Back to Housing Committee — 15 February 2023 and its agenda
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North Lanarkshire Council Report Housing Committee Does this report require to be approved? ☒ Yes ☐ No Ref SL / GT / AJ Date 15/02/23 Former Tenant Arrears Write Off to 31 March 2021 From Stephen Llewellyn, Chief Officer of Housing Management E-mail telferg@northlan.gov.uk Telephone Greg Telfer, Business Finance Manager, 01698 302836 Executive Summary The purpose of this report is to present to Committee a summary of outstanding Housing Rent debts which are deemed uncollectable following all attempts at recovery by the Housing Rents and Court teams or are considered uneconomically viable to continue pursuing. In accordance with financial guidelines a provision for expected credit losses has previously been established for the outstanding accounts highlighted below. The debt to be written off relates to former tenancies where the tenancy end date is prior to 31 March 2021. The total recommended write-off is £2,610,389.07 which equates to 1.82% of the total rent income of £143,783,000. Recommendations It is recommended that Committee: (1) Acknowledge the decision of the Chief Officer of Housing Management and the Chief Officer of Finance to write off £317,507.27 under delegated responsibilities; (2) Approves the write off of £2,292,882.10 which includes individual debts greater than £500; (3) Approves the write off of credit balances that have arisen in some former tenancy rent accounts, totalling £39,592.85; (4) Remit this report to the Finance and Resources Committee. The Plan for North Lanarkshire Priority Enhance participation, capacity, and empowerment across our communities Ambition statement (21) Continue to identify and access opportunities to leverage additional resources to support our ambitions
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1. Background 1.1 The Housing Service has a turnover in tenancies each year of approximately 3,000 with tenancies terminating for a variety of reasons. 1.2 The Housing Service has a full rent arrears process in place ranging from reminder letters at the early stages through to the pursuit of arrears via the courts. The arrears process actively pursues debt in both current tenancies and former tenancies and only ever seeks to write-off debt relating to former tenancies once all avenues of recovery have been exhausted. 1.3 A whole range of payment methods are available to tenants to enable them to make payments towards their rents in a timely and consistent manner that suits their circumstances. These range from Direct Debits, Online Payment facility, Standing Orders, Post Office, Paypoint and deductions from wages. 1.4 Early intervention and engagement with current tenants who fall into arrears is a key part of the process to minimise the level debt that exist when tenancies terminate. 1.5 As a result of these proactive efforts, the Council’s collection rate improved from 99.51% in 2015/16 to 99.57% in 2016/17. However, the impact of Universal Credit in recent years has challenged this with collection rates reducing to 98.81% in 2017/18 and 97.46% in 2018/2019. Due to the efforts of the service in recovering historic debts, the equivalent figure for 2019/2020 figure was 100.45%. 1.6 Rent collection levels reduced to 97.9% in 2020/21 following the onset of the Covid-19 pandemic and remained at similar levels during 2021/22 at 97.8%. however, the arrears position has stabilised through the significant efforts from the Housing Rents team in securing more direct Universal Credit payments, pursuing other non-Universal Credit tenant debt and the ongoing benefits of the Universal Credit Assistance Fund and various rent relief funds made available over the last two financial years. 1.7 Despite these steps there are a number of debts that are deemed uncollectible or are considered not economically viable to engage further collection activities and costs. This annual process of assessing the likelihood of debt non-recovery conforms to accepted best accounting practice and is a realistic assessment of expected outcome. 1.8 The impact of various welfare reform measures has seen a significant increase in total rent arrears from 2013/14 onwards. North Lanarkshire Council moved onto full Universal Credit status in April 2018 and there has been a significant increase in current tenant arrears as a result. This is likely to an adverse impact of the future levels of former tenant arrears that will be sought for write off. A full Income Maximisation Service is offered to all tenants to try and mitigate the impact of welfare reform on them. 2. Report 2.1 An exercise has been undertaken to identify debt that is now considered to be non- collectable. In accordance with financial guidelines a provision for expected credit losses has previously been established for the outstanding accounts highlighted below. 2.2 There are a number of reasons why the outstanding balances are being written off and these are summarised below: a) Liquidation / Sequestration. The debtor has been liquidated / sequestered etc, and there is no prospect of recovery of funds. b) Deceased. The debtor is deceased and there have been insufficient funds within the estate to meet the sum due.
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c) Eviction / Abandonment / No Forwarding Address. The debtor has been unable to be located following eviction or abandonment of their tenancy or have left no forwarding address and there is no prospect of recovery of funds. d) Recovery exhausted. All avenues of recovery have now been exhausted via our internal processes and via the courts and the decision has been taken not to pursue any further any recovery is considered to be not possible. 2.3 The following tables categorise the value of debt recommended for write-off by cause and value: Cause Analysis Write-Off Value £ No of Tenancies Average Write- Off Value 2023 £ Average Write- Off Value 2022 £ Abandoned 442,890.73 296 1,496.25 1,611.67 Deceased 254,708.03 573 444.52 406.44 Eviction 72,940.30 31 2,352.91 2,860.40 Liquidations/Sequestrations 66,551.97 46 1,446.78 1,787.40 No forwarding address 220,804.67 258 855.83 864.71 Recovery exhausted 1,552,493.37 1,876 827.56 1,062.70 Total 2,610,389.07 3,080 847.53 1,132.82 Credit Balances (39,592.85) 339 (116.79) (35.0) Value Analysis Write-Off Value £ No of Tenancies Average Write- Off Value 2023 £ Average Write- Off Value 2022 £ < £500 317,507.27 1,933 164.26 185.93 >£500 2,292,882.10 1,147 1,999.03 2,118.45 Total 2,610,389.37 3,080 847.53 1,132.82 2.4 The write off being proposed to 31 March 2021 represents 1.82% of the total rental income of £143.783m. The following table outlines the value of the annual former tenant arrears write-off over the previous 5 years: Former Tenant Arrears Written Off to Value (£) % of income 31 March 2020 3,560,465 2.57 31 March 2019 3,505,183 2.54 31 March 2018 2,408,607 2.09 31 March 2017 1,518,109 1.36 31 March 2016 1,445,028 1.29
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2.5 The previous tables highlight a reduction in the overall write off value up to 31 March 2021 compared to the peaks over the last two financial years. Importantly, it’s worth noting that the average value of the write-off has reduced for most categories and overall. This reflects the continued efforts of the Housing service over the last few years in relation to early engagement with tenants and offering the income maximisation service. It is hoped that this positive trend will continue. 2.6 The Council will continue to seek collection of the outstanding balance if the circumstances of the debtor alter and recovery is deemed practical. 3. Measures of success 3.1 The Service continues to engage in a number of activities aimed at improving collection rates, reducing debt arising and streamlining the recovery process. The Council will continue to seek collection of the outstanding balance if the circumstances of the debtor alter and recovery is deemed practical. 4. Supporting documentation Not applicable. Stephen Llewellyn Chief Office of Housing Management
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5. Impacts ( http://connect/report-template-guidance ) 5.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality- and-fairer-scotland-duty-impact-assessments Yes ☐ No ☐ 5.2 Financial impact Does the report contain any financial impacts? Yes ☒ No ☐ If Yes, have all relevant financial impacts have been discussed and agreed with Finance? Yes ☒ No ☐ If Yes, please provide a brief summary of the impact? There are no additional financial implications linked to this report for the current financial year because a corresponding bad debt provision has been included in the previous year’s accounts. 5.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ If Yes, have all relevant HR impacts have been discussed and agreed with People Resources? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☐ No ☒ If Yes, have all relevant legal impacts have been discussed and agreed with Legal and Democratic? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐ If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐
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5.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? Where the impact identifies a requirement for significant technology change, has an assessment been carried out (or is scheduled to be carried out) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 5.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.9 Risk impact Is there a risk impact? Yes ☐ No ☒ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g. Corporate or Service or Project Risk Registers), and how they are managed? 5.10 Armed Forces Covenant Duty Does the report require to take due regard of the Armed Forces Covenant Duty (i.e. does it relate to healthcare, housing, or education services for in-Service or ex- Service personnel, or their families, or widow(er)s)? Yes ☐ No ☒ If Yes, please provide a brief summary of the provision which has been made to ensure there has been appropriate consideration of the particular needs of the Armed Forces community to make sure that they do not face disadvantage compared to other citizens in the provision of public services.