25 March 2020
The impact of COVID-19 on residential landlords and tenants
The Government last week announced emergency measures to protect residential tenants from eviction during the COVID-19 outbreak. The draft emergency Coronavirus Bill (“the Bill”) currently is making its way through Parliament and will likely be enacted this week.
Protection for Tenants
The majority of residential tenancies in England and Wales are assured shorthold tenancies, and the Bill provides the following in respect of these:-
1. Section 21 possession notices, which are served by a landlord at the end of a fixed term, will need to provide 3 months’ notice for the tenant to vacate, rather than the current 2 months’ notice.
2. Section 8 possession notices, which are most commonly served by a landlord due to rental arrears, will also need to provide a 3-month notice period. Currently the notice period for the mandatory rental arrears ground is 2 weeks.
3. The prescribed forms of these notices are also due to be amended to reflect these changes.
4. There are also extensions to the applicable notice periods for other tenants which include protected, statutory, secured and assured tenants. Generally, any previous notice provision is extended to at least 3 months.
Once these notice periods expire, landlords would still need to apply to court for possession with any failure to do so constituting a criminal offence.
There may be some delays experienced with the courts during this period of uncertainty. It is also unclear whether court bailiff and other enforcement agency services will remain accessible to landlords if tenants do not vacate properties voluntarily.
These provisions will remain in place until at least 30 September 2020 and this date could be extended by further enactment.
Options for Landlords
Firstly, before taking any other steps, you should speak to the provider of any landlord’s insurance policy that you have in place. This policy could provide for the recovery rental losses, but the terms of the policy may prohibit you from entering into any separate agreement or arrangement with your tenant.
You should also consider a mortgage holiday to defer mortgage payments on buy-to-let mortgages. The FCA have confirmed that landlords with buy-to-let mortgages may apply to their lender for mortgage holidays of up to 3 months. You should speak to your lender initially to discuss your options.
You will still accrue interest on the mortgage balance for the duration of the holiday, but it provides landlords with the ability to defer payments to coincide with tenants being able to pay rent.
Mortgage lenders have been directed by the FCA to not take steps to commence repossession action at this time, absent any exceptional circumstances which include the homeowner themselves requesting that repossession continues.
Lastly, you could seek to enter into an agreement with your tenant, perhaps by offering an immediate rental reduction. You could engage with your tenants in respect of what they can pay, with an option for you to reclaim any balancing payments pro-rata through the remainder of the term in manageable instalments. In return tenants could offer to extend the fixed term.
Landlords would ultimately want to ensure that good tenants remain in their properties until this outbreak is contained. If relations break down with tenants, there will be an unavoidable delay in obtaining possession.