The Coronavirus Act introduced a ban on private tenant evictions, and this, coupled with the general media message abroad that tenants should have a rent reduction, a rent holiday or even pay no rent, creates major issues for some buy-to-let landlords.
The eviction ban is in for at least the next three months, which means the suspension of all eviction proceedings going through the courts for 90 days. It exposes landlords to a risk not encountered before, of an extended and lengthy period of rental losses.
It’s very unfortunate for those landlords who were in the process of evicting tenants when the crisis came along, possibly with large existing rent arrears losses when trials were halted and the county courts closed down.
So, landlords now
needing to evict a tenant for any reason, including rent
arrears, is required to
give a minimum of three months’ notice, until at least the 30th of September. The extension of the legal notice might add only one month to the usual S21 two-month notice period, but this is just the start of the process. Obtaining a court possession order to evict those tenants who are unwilling to move will inevitably eventually face long delays due to the backlog of suspended cases, and possibly a more lenient approach taken by the courts.
The message seems to have been lost in translation over rent payments, or is it just wishful thinking on behalf of some tenants or their campaigning groups? Government has not asked landlords to stop requesting rent payments, and tenants need to be reminded they should continue to pay rent and that they will still be liable for any arrears that build-up.
Landlords are advised to get in touch with all their tenants to determine their financial situation and deal with their situation on a case by case basis, bearing in mind the social distancing measures in place. Some landlords are voluntarily offering a 20% reduction where tenants are on an 80% wage reduction furlough, a rescheduling of payments where there are real difficulties, such as job losses or suspensions, or a combination of the two. Tenants should be able to apply for financial assistance when they are in real difficulties.
Landlords themselves should be able to apply for financial support through the benefits system if they too find themselves in personal financial difficulties, and bearing in mind those landlords with mortgages on their rental properties are able to request a three-month payment holiday from their lender.
Landlords with tax due on account, the second HRMC payment due on 31st of July, can defer these self-assessment payments until the 31st January 2021 under the special measures introduced by the government.
However, it is very unlikely that landlords will be offered any further direct help from the government, similar to that being offered to the self-employed. This is because letting property on a personal basis (outside a limited company) is classed as investment, not a business. The trade-off is that earnings from lettings are not subject to Class 2 or Class 4 National Insurance contributions.
In the case of commercial landlords, again they are not expected to bring eviction proceeding against their business tenants for at least 3 months, for rent arrears. These landlords have an additional business judgement to consider: if they press their tenants too hard and drive them into administration for incorporated tenants, or bankruptcy for personal tenants, then they risk having to take on, for an indefinite period, business rates, insurance and other liabilities which go with a vacant unit.
The National Landlords’ Association (NLA) and the Residential Landlords’ Association (RLA), now combined as the NRLA, say they recognise the need for tenants to be able to remain in their homes given that they might be adversely affected by coronavirus and by the government lock-down restrictions. However, they are not happy with a blanket suspension of all evictions which they think is “too wide reaching” and that the government should do more to protect tenants’ incomes.
In addition the NRLA has called for a temporary scrapping of the five-week wait for the first payment of Universal Credit, to help tenants over this payment gap.