Eviction ban set to be extended

Eviction ban set to be extended by four weeks in England and Wales. Buy to let market picks up as new products and higher LTV's are re-introduced. Government urged to do more to financially support landlords. Increase in electrical checks as regulation changes for buy to let properties.;
Eviction ban extended

Ministers have decided to extend the eviction ban for another four weeks in England and Wales.

The ban was set to be lifted on 23rd August 2020, after being extended in June, due to the financial hardship tenants faced as a result of the Covid-19 pandemic.

The decision was made following warnings that thousands of renters would be at risk of losing their homes. Numerous charities voiced that this would cause a ‘devastating homelessness crisis’.

In addition to extending ban, it was also announced that landlords will now be required to provide tenants with at least six months’ notice in England, an extension of three months, until at least March 2021.

Action taken:

It was estimated that a quarter of a million people were to be at risk of losing their, causing numerous charities and organisations to take action.

Shelter, a housing and homelessness charity, launched a campaign with the aim to reach out to Housing Minister, Robert Jenrick, in hope to encourage him to re-consider the decision to lift the ban.

Similarly, The London Renters Union (RLU) planned to hold a day of action on Monday 24th August 2020, to encourage the government to take further action to protect renters.

The decision:

In his announcement on 21st August, Housing Secretary Robert Jenrick said:

"I know this year has been challenging and all of us are still living with the effects of COVID-19. That is why today I am announcing a further four-week ban on evictions, meaning no renters will have been evicted for six months.

"I am also increasing protections for renters - six month notice periods must be given to tenants, supporting renters over winter.

"However, it is right that the most egregious cases, for example those involving anti-social behaviour or domestic abuse perpetrators, begin to be heard in court again; and so when courts reopen, landlords will once again be able to progress these priority cases."

What about landlords?

Many landlords and letting agents now find themselves in a position of uncertainty, and have called for the government to take actions to protect them.

Ben Beadle, chief executive of the National Residential Landlords Association, voiced his concern, stating that:

"A blanket extension is unacceptable, especially so close to the deadline. This announcement satisfies no-one.

"Landlords have been left powerless in exercising their legal right to deal with significant arrears unrelated to Covid-19, anti-social behaviour and extremely disruptive tenants who make life miserable for their neighbours and housemates.

"Private landlords cannot be expected to foot the bill for Government failure."

Similarly, Marc vom Grundherr, director of Benham and Reeves, explained that:

“Unfortunately, it isn’t the responsibility of UK landlords to take this financial hit on behalf of their tenants and to expect them to continue to is somewhat unfair, considering they have already done so for some months having had no choice in the matter.

“Those tenants who have found themselves in financial hardship due to the coronavirus have now had time to seek alternative living arrangements without the pressure of eviction. In any other scenario, it’s unlikely they would have been afforded this luxury.

“It’s also incredibly unfair not to consider the landlord in this scenario as many are reliant on rental payments in order to survive and have had no choice but to swallow this loss of income due to the eviction ban.”

Buy to let market picks up

Industry data presented by Moneyfacts, suggests that the buy to let market is proving to be more ‘robust’ than the residential sector.

Despite lenders initially removing deals from the market at the beginning of pandemic, the buy to let mortgage choice has been on an upward trend since the lockdown was relaxed.

The increase in products for both two and five-year fixed deals has been cited as positive news for the market, says Eleanor Williams, a Finance Expert at Moneyfacts.

85% LTV back on the market:

Notably, the buy to let market remains competitive. More lenders are bringing back products at 80% loan to value (LTV), with one lender reintroducing 85% LTV deals, for standard buy-to-let mortgage products, HMO’s and multi-unit blocks.

Kevin Roberts, Director of Legal and & General Mortgage Club explained:

“The buy-to-let market has seen its fair share of challenges in recent times, but it’s an area where we are now seeing increased activity from consumers since the lockdown eased,”

“Not only are we seeing more existing landlords expanding their portfolios, but new ‘part-time’ landlords are also looking to take advantage of the recent stamp duty holiday to step into buy-to-let."

Data gathered from Legal and General’s mortgage tool, used by mortgage advisers, has shown that buy-to-let enquiries have increased by two and half times between April and July this year.

Interestingly, Roberts reveals that searches by advisers for first-time landlords have increased ‘four-fold since April’.

Great opportunity:

Chancellor Rishi Sunak’s announcement, that buy to let investors would be benefiting from the change in stamp duty, has presented a good opportunity for investors to explore their options.

Whilst property investors and second homeowners must continue to pay the 3% stamp duty surcharge on new purchases, the holiday means they now pay nothing else on the first £500,000 of the property’s value.

With that in mind, it could also be said that with the cancellation of holidays, and other big events as a result of COVID-19, people have found themselves with more money than they had planned for, leaving them to look at new ways to invest their savings.

The increase in buy to let activity is encouraging news for those that are looking to rent, as there has been concerns regarding the mismatch in supply and demand of rental properties, which has caused rents to rise in some areas.

Financial support needed for Landlords

The need for the government to financially support landlords emerges, after Housing Minister, Robert Jenrick announced another extension of the eviction ban in England and Wales.

The extension has caused great concerns for landlords, as their tenants now find themselves in rent arrears.

Due to the lack of government support, more landlords are seeking guidance and advice from landlord groups and membership organisations.

The impact:

Ultimately, the decision has caused landlords to take on more financial responsibilities, and for some, this has led to them missing mortgage payments.

Many warn that this could force landlords to sell their properties, or even face repossession by their mortgage lender.

Paul Shamplina, founder of Landlord Action, expresses his disappointment, stating that:

“This is absolutely devastating news for those landlords who already had possession cases ongoing prior to the pandemic.

“It means those landlords with problem tenants who have been causing anti-social behaviour or withholding rent for reasons unrelated to Covid-19 face a further delay in regaining possession of the properties.

“Why have they left until the Friday before the courts re-open to give a further extension? I do not believe enough consideration has been given to people in these set of circumstances and perhaps rather than a blanket ban, existing cases should have been allowed to restart as planned."

He reveals, that many landlords that have contacted Landlord Action have been covering two mortgages payments for more than nine months, and suggests for the government to offer landlords ‘three months of rent contribution’ as financial support.

Long term:

Many are now becoming concerned of the long term repercussions of the extension.

Timothy Douglas, Policy and Campaign Manager at ARLA Propertymark states that:

“Now that the ban has been extended, the government must use this time to introduce further guidance and prepare the sector.

“Given the backlog of cases already facing courts, it’s key that the government introduces sufficient guidance during this period to enable eviction proceedings to begin again smoothly and fairly when the ban is lifted.”

When the ban lifts, there will likely be a large build-up of existing claims as well as new possession claims being issued.

This will therefore cause massive delays, as claims may not be heard for months or in extreme cases, years, as courts will be at full capacity.

Alex Cook, Director of Helix Law, a specialist litigation firm, suggests that such a long wait would be ‘devastating’ for landlords but also the renting economy.

He explains that:

"This makes buy to let less attractive and, if landlords and investors sell, that worsens the rental market for tenants as another rental property is sold. This increases rents for those remaining.

“I see a real need to embrace private rental sector landlords as part of the housing solution rather than 'the problem' - with one important first step being the need to ensure claims are processed quickly if they are necessary."

Increase in electrical checks due to rental demand

As the demand for rental properties continues to increase since the lettings market reopened in mid-May, landlords are now being warned of additional mandatory electrical checks.

Whilst this demand is a positive sign for landlords, new electrical safety regulations have been introduced by the government as a ‘major step’ in offering high quality, safe and secure housing.

In response, PropCert, a national provider of property certificates warns that landlords may receive a higher volume of electrical checks, as a consequence.

Changes in regulation:

The change in regulations affecting both new and existing tenancies came into effect on July 1st 2020, under the introduction of The Electrical Safety Standards in the Private Rented Sector (England) Regulation.

A number of requirements have been introduced under the new regulation.

Landlords must arrange for an EICR report to be completed before the start of all new tenancies, with fixed electrical installations to be inspected and tested by a professional at least every five years.

Other requirements include, supplying a copy of the EICR report to new tenants before they occupy the premises, and for existing tenants, landlords are now required to provide a copy within 28 days of the inspection taking place.

What does this mean for landlords?

Tom Harrington, Managing Director at PropCert, suggests that the change in regulation will mean there will be more pre-tenancy administration work to complete, and compliance factors to consider when landlords and letting agents take on new tenancies.

He states that:

"The new regulations mean that there is now a greater demand for professionals carrying out electrical checks than ever before. High tenant demand means that agents and landlords will be under pressure to get these checks completed quickly so moves aren't delayed.

"Since the new rules were introduced in July, property professionals may have realised that they need to assess the electricians they work with and the processes they have in place to keep up with demand and remain compliant.”

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.