How landlords can navigate Covid-19
- Published: Thursday 19 March, 2020
- Updated: Tuesday 05 May, 2020
- By: Nicola Eaton
The Coronavirus pandemic has rained confusion and concern on all aspects of life. For landlords, many questions have arisen around managing tenancies and securing rent, at a time when large numbers of tenants may be struggling financially.
Thisismoney.co.uk has published answers to a number of key questions that landlords may be facing.
It is beneficial for landlords to retain good tenants at any time, but especially at present, given that government advice to the public is to restrict movement as much as is possible. Clearly moving house is directly affected by this essential measure, so replacing tenants will be very challenging whilst the UK is on lockdown.
The report references government advice to landlords, asking them to 'to show compassion and to allow tenants who are affected by this to remain in their homes wherever possible', and goes on to address what that means in real terms.
The overarching advice, is to have an open conversation with tenants to understand their circumstances and needs.
It then becomes a matter of comparing that with your own position, as the landlord, and devising a plan that can hopefully accommodate both parties.
Tenants asking for rent reductions
It is important that tenants are clear that they remain liable for paying rent – Covid-19 is not a carte-blanche justification to stop paying.
Chief Executive of tenancy deposit scheme, TDS, Steve Harriott echoed the sentiment of support, whilst addressing the need for rent to be paid:
"Now is the time to be having an honest and frank conversation about rents and financial concerns, working together to put a rent payment scheme in place."
The report makes the point that, retaining a tenant who is committed to a programme of paying back rent in the future, where they have a good history of paying rent in the past is the logical approach to take.
Opinion is also sought from Bob Young, chief executive of Fleet Mortgages, a specialist buy to let mortgage lender, who said:
“Providing temporary help, especially if they're good tenants, is likely to be the sensible option for most landlords”
Ensuring you adhere to your mortgage contract
Buy to let landlords, with mortgages, commonly have to ensure rental income is no less that the sum stipulated in their tenancy agreement, in order to comply with their mortgage contract.
At a time when landlords may be considering a temporary arrangement to receive less rent, or defer rent payments, it is important to ensure this is done with consent from their lender.
David Cox, chief executive of ARLA Propertymark, suggests that a practical first step is to calculate rent affordability, based on the tenant’s current financial circumstances, as is done at the start of a tenancy.
By doing this, landlords can establish whether the tenant can still afford the rent, or whether a part-payment or deferment of rent is necessary.
Once the tenant’s financial position is clear, the scale of any problem can be assessed.
Landlords may have funds available to cover a shortfall in rent, whilst maintaining their mortgage payments.
Where this isn’t the case, landlords can speak to their lender directly, to find out if the solution they are considering for their tenant is acceptable, within the terms of their mortgage. Lenders will also be able to discuss financial help they can offer their landlord clients.
Should landlords offer rent reductions by default?
There is no blanket requirement to offer a reduction in rent, if the tenant has not requested it.
Landlords remain liable for their mortgage payments. Any missed payments must be paid back in the long run, even if a lender offers a payment holiday now.
Do I need a solicitor to arrange a payment plan?
Those quoted in the Thisismoney.co.uk report suggest that confirming in writing the specifics of a payment plan, to the tenant, is sufficient.
However, where something as serious as payment of rent is concerned, ensuring any agreement is suitably binding is essential.
You may come to rely on such documentation, if a tenant does not uphold their commitment to you. For this reason, Commercial Trust would always recommend seeking legal advice.
The report makes the point that a tenant may also need the evidence of a written agreement, in order to claim benefits in light of their circumstances.
How to arrange a payment holiday
Missing mortgage payments, without seeking consent from your lender, can significantly affect your credit record and therefore affect your ability to secure borrowing in the future.
Whilst getting hold of your lender may be challenging, given the high volume of calls they may be handling at present, it is essential that you persevere.
Will insurance cover Coronavirus?
In short, the advice here is to check with your insurer, sooner rather than later.
Rent Guarantee Insurance commonly requires a landlord to have issued an eviction notice, in order to make a claim, but the government has banned all eviction actions, as the result of Coronavirus.
In an article on the subject from the Guardian, Direct Line is quoted as saying that a claim can only be made, if an eviction notice “has been correctly served on the tenant”.
Councils tackle AirBnB bookings
Landlords with holiday lets are being urged not to accept bookings, in light of government advice to restrict movement in order to contain the spread of Coronavirus.
Councils and heads of tourist companies are reaching out to landlords to get the message through, as some have been found to have been advertising “Covid-19 retreats” on booking platforms.
AirBnB has disabled its instant-booking functionality, and placed warnings on its consumer and host-facing platform, reminding both to adhere to government warnings.
Nigel Huddleston, the Minister for Sport, Tourism and Heritage, said:
"Essential travel does not include holidays, leisure travel and visits to second homes - and people must remain in their primary residence.
“It is incredibly irresponsible, and dangerous for some property owners to be marketing themselves as ‘isolation retreats’.
"We are writing to companies today to remind them of their responsibilities at this time."
Fines for those breaching lockdown rules
The police can issue fines of up to £960 for those violating Coronavirus lockdown rules.
A first fine starts at £60, reduced to £30 if paid within 14 days. But, for each subsequent violation, the fine doubles, up to the maximum £960 penalty.
Help to support AirBnB hosts
AirBnB has pledged to help support their host clients, with a statement on their website saying that:
“We will pay $250 million (~£200 million) to hosts to help cover the cost of COVID-19 cancellations. When a guest cancels an accommodation reservation due to a COVID-19-related circumstance, with a check-in between 14 March and 31 May, we will pay you 25% of what you would normally receive through your cancellation policy. This applies retroactively to all COVID-19-related cancellations during this period. This cost will be covered entirely by Airbnb. These payments will begin to be issued in April.”
For the company’s “Superhosts” there is a further fund available:
“We are creating a $10 million (~£8 million) Superhost Relief Fund. This is designed for Superhosts who rent out their own home and need help paying their rent or mortgage, plus long-tenured Experience hosts trying to make ends meet.”
There are particular concerns that the approaching Easter weekend, coupled with fine weather, may see members of the public and holiday lettings landlords flout the Coronavirus lockdown, but the message remains clear that staying at home is essential.
Tenants moving during Coronavirus lockdown
Landlords with tenants due to move in or out of their property have been advised to delay wherever possible, during the Coronavirus lockdown. However, in instances where a home move must take place, there is advice available.
Moving home is not currently prohibited by the government, but clearly extreme caution and care must be taken if it is not possible to change plans.
Estate agents, conveyancers and surveyors are able to operate in some circumstances, a summary of the guidance from the government is as follows:
Estate agents should:
- Help clients negotiate a delay in moving wherever possible
- Prioritise help for clients with Coronavirus symptoms in securing a new moving date
- Keep branches closed and halt any home visits
- Set up their employees to work from home to help existing and new clients
- Work to progress sales where it is possible to do so whilst adhering to lockdown
- Advise clients not to exchange contracts unless specific terms of contract require it
Where a survey of an occupied property is not urgent, conveyancers aren’t expected to proceed with the work, furthermore:
- Whilst working in someone’s home is not prohibited, no survey should be conducted where an occupant has Coronavirus symptoms
- If work is essential, health and safety guidance to keep a 2 metre distance and regularly wash hands for at least 20 seconds, must be followed.
- No work should be conducted by anyone who has (even mild) Coronavirus symptoms
- Existing commitments should be honoured “where it is clear that the move can be done safely for the client and your own staff and it is clear that the moving date cannot be moved”.
- Working in a third party’s home is allowed, as long as the tradesperson is in good health and showing no signs or symptoms of Coronavirus.
- All established health and safety measures should be maintained, including keeping a 2 metre distance from one another, and washing hands frequently for at least 20 seconds.
- Government guidance for employers has also been issued, which may be useful to landlords who self-manage their property.
Can tenants leave a tenancy early due to Coronavirus?
Shelter’s advice to tenants is that they cannot leave a tenancy early due to Coronavirus, unless the tenancy agreement has a break clause or the tenant negotiates an early end date with the landlord.
Visits and inspections
Any non-urgent visits and inspections should be delayed, including tenancy inspections to establish upkeep of the property and viewings of the property.
However, landlords are required by law to keep up to date with gas safety and electrical checks and urgent repairs to property.
Tenants need clarity on rent obligations
There is concern amongst landlords, that messages around financial assistance relating to Coronavirus, are being misinterpreted by tenants as a blanket halt to all rent payments.
Various measures have been put in place to protect landlords and their tenants since the Coronavirus outbreak, including the suspension of tenant evictions from private rented accommodation. But, tenants remain liable for payment of rent.
However, it seems the message regarding mortgage payment holidays, is somewhat unclear for tenants and landlords are urging the government to make it clearer.
The National Residential Landlords Association (NRLA) are receiving increasing numbers of reports from their members that tenants are under the impression they do not have to continue to pay rent during the pandemic.
Ben Beadle, Chief Executive of the NRLA, states that:
“The mortgage repayment holiday is only available for landlords who are struggling to make their payments because their tenants are unable to pay part or all of their rent as a direct result of the coronavirus and through no fault of their own. It is not an automatic payment holiday and landlords who successfully apply still have to make these payments later on. It is not a grant.
“What it does allow is that where a tenant is having genuine difficulty in meeting their rent payment because of a loss of income, landlords have much greater flexibility to agree a mutually acceptable plan with the tenant to defer the rent due.
“This is not a green light to tenants everywhere to stop paying their rent.”
The NRLA has received calls from people asking for struggling tenants (especially students) to be given time rent-free. But landlords have made clear that this poses a impossible financial burden on them, suggesting that doing so would put the long term future of private rentals at risk.
Although the NRLA admits that flexibility is needed during these times of uncertainty, they want to see the Government better publicise its guidance involving the private rental sector, to avoid confusion and ensure tenants continue to meet their legal and contractual commitments – where they can.
The association has since called for clarity from the Government to reassure both tenants and landlords.
Responding on the Government’s behalf, Baroness Bloomfield of Hinton Waldrist confirmed that there are no intentions to introduce a payment holiday for tenants, stating that:
“the Government does not believe a ‘rent holiday’ is necessary at this stage”.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.