Be careful when giving rent holidays to tenants, warn experts

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Landlords may want to help struggling tenants and give them a rent holiday, but past experience shows putting it all down in writing correctly is the key to future problems.

Landlords need to be clear about the
timeframe of any rent holiday given during the crisis to avoid confusion and
future disagreements with tenants, leading experts have warned.

Giving a rent concession for a specified period of months, rather than trying to limit it to the duration of the emergency is a safer bet, according to David Smith, policy director at the National Residential Landlords Association.

He advises landlords to get something clear in writing, decide
whether it’s a temporary reduction or a waiver – if the money is going to be paid
back later, and if so on what basis – and if interest needs to be paid.

Says Smith: “There’s no point in saying ‘until the current
situation ends’ as that’s too uncertain. Better to say three months and then
extend it later on.” 

Tim Frome Legal Director at Landlord Action says: “There is legal precedent which states that a landlord should agree the specifics of any changes to the rent with their tenant.

“A written and signed agreement stating the
amount of any reduction and the period of time would be best.

“Remember if the situation changes in the
future you can always revisit the agreement, but I would urge landlords to
discuss any issues directly with their tenant, then formalise any changes to
accepted rent in this way.”

Legal precedent

Confused landlords have
been directed to an old but relevant legal case of Central London Property
Trust v High Trees House, where the owner of a block of flats agreed that a
tenant could halve their rent in 1940 due to the “prevailing conditions” at the
time.

The agreement simply
stated, “We confirm the arrangement made
between us by which the ground rent should be reduced…to £1,250.” However, it
didn’t mention the length of time this should be, and the tenant argued the
arrangement was permanent.

The
court decided that the rent should revert to the full amount in early 1945,
when the prevailing conditions at the start of the war had disappeared.

Smith tells LandlordZONE
that the High Trees case is used a lot,
although not in this way.

He explains: “The High Court actually declined
to find any agreement existed at all but held that it would be unconscionable
for the landlord not to keep the promise of the reduction. Which is why it’s an
estoppel.” 

Download a free pro-proforma
rent reduction agreement.

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David Lawrenson: How I readied myself for Coronavirus (and other downturns)

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Leading landlord and founder of private rental market consultancy www.LettingFocus.com is so far, relatively unaffected by the coronavirus. Here he explains why.

So, here we are in the middle of this pandemic. But I count myself quite fortunate so far. Here’s why.

Firstly, all but two of my properties have mortgages which are on lifetime base rate tracker rates.

Mortgage companies don’t tend to do
these any more – preferring to limit trackers to limited periods like two years
or five years, if they even do them at all.

I guess they learnt their lesson from
when Mark Alexander and his motely band of landlord borrowers fought the
building society, The West Brom, all the way to the Court of Appeal over that
society’s attempt to wriggle out of their own lifetime base rate tracker rate
deals by citing some nonsense in the small print of their mortgages.

Though Mr. Alexander lost the case at
the High Court, the group bravely fought on, even as costs mounted to over
£300,000. They were finally vindicated when at the Court of Appeal, Lord
Leveson, (the phone hacking scandal judge), saw through The West Brom’s
obfuscation and found in the borrowers favour.

The cost to the West Brom was £27.5m,
plus costs – a very chunky amount, but one that somehow did not stop its chief
executive later becoming chairman of the Building Societies Association.

I held onto my old trackers because
the experience of the credit crunch of 2008/9 (and other credit crunches), was
that new mortgage rates, during such periods of tight money, tend to be at very
high margins over Bank of England base rates.

So, I prefer to stick to my old
lifetime trackers. These range from 0.69% over base to 2.00% over base. It has
stood me in good stead.

And with the Bank of England smashing
the base rate down to a record-ever low of 0.1%, I’m glad I’m not on a standard
variable rate, where the rate, is of course, up to the lender to adjust. Many
are not keen on adjusting rates downwards.

Notice periods

Another approach that has stood me
well is to have always made sure that at the end of each fixed term assured
shorthold tenancy, the default is that the tenancy moves onto becoming a contractual periodic tenancy
with a notice period from the tenant that is longer than one month.

In the current coronavirus
environment where people are not supposed to be doing viewings, I suppose
landlords would like it if, when their current tenants gave notice, the notice
period was as long as possible, (as they won’t be re-letting any time soon and
be facing a void).

This brings me to the issue of what
period of notice a tenant should give, once a fixed term in an assured
shorthold tenancy has ended (and also when there was no fixed term in the first
place).

Many people think it the notice
period has to be one month – where rent is paid monthly – and there is no
choice about this.

But this is not true.

I think we can credit Shelter with
having the most succinct summary on
their site, where it says that if the original tenancy states that at end
of a fixed term the tenancy would roll on to become a “contractual periodic
tenancy”, then the notice period the tenants must give would be whatever
was stated in the original tenancy agreement.

Only if the tenancy agreement was
silent on the matter, it would be effectively become a “periodic tenancy”
and the notice required from the tenant would be whatever the “period” was,
usually monthly, of course – so a month of notice would be all that a tenant
needs to give, in such cases.

What do I do with
my tenancies

Well, for years, I’ve always stated
in our assured shorthold tenancies, that after the fixed term ends, unless
ended by us or the tenant, the tenancy simply continues as a contractual
periodic tenancy, with 42 days’ notice required to end it from the
tenant. (Of course, if it is the landlord wishing to end a tenancy, after
the fixed term has ended, they would normally need to give 2 months’ notice).

I have been letting property in
England for over 30 years and let to many tenants in that time and have never
had a problem with this notice period from a tenant.

In practice, we find that we can
usually find another tenant who can start a new tenancy much earlier than in 42
days, and so, if it suits the current tenant who is leaving, we can end the
current tenancy earlier than in 42 days, and make a pro rata rent payment back
to the leaving tenant.

Why do I like 42
days?

I like the 42 days to be stated in
the tenancy agreement, because sometimes stuff could happen where one would
like it to be longer than a month. We might be away on holiday and unable to
perform viewings, for example.

Just having an extra 12 days above a
normal month give a little extra comfort.

Right now, when viewings are supposedly
banned, anything more than a month is a bonus.

I suppose one could ask for two
months (maybe longer still than that), though this would might be deemed unfair
to me – and could potentially be viewed as an unfair contract term. But as far
as I know, the question of really long notice periods in contractual periodic
tenancies after a fixed term has ended, has never been tested in court.

All tenancies paid Up

So far, all my tenants have paid up
to date. Only one has enquired about the possibility of a “rent holiday” due to
Covid19.

This may be a function of our
stringent affordability and reference checks, or maybe I have just been lucky
so far. I am not sure which.

For the one tenant who enquired, this
was an odd situation. They are a couple in their early twenties, the wife said
that her employer (a lawyer) was actually thinking of moving her onto statutory
sick pay (not furlough).

However, she normally earns £26K, was
not actually sick, did not have the virus and was home as there was no work at
present. All in all, a very odd situation.

Making it odder was the fact that her
husband, on his own, had a secure job as a police officer, and his earnings
alone were 2.7 times the rent, comfortably high enough to afford the rent on
his own, irrespective of his wife’s situation.

We pointed this out to this tenant
and also pointed her to the government’s advice pages on furlough, suggesting that
perhaps what her company was doing was illegal.

We heard no more from them – and the
rent has been paid, along with all the others.

What will the
economic impact be?

I expect achieved house price sales and rents to be around 15% lower by the end of May than they were at the end of January. House prices may possibly be slower to fall.

However, much bigger falls than this
are likely in both house prices and rents in places that are heavily dependent
on tourism and hospitality.

This presents opportunity to buyers,
especially those with cash, who can move fast.

In around 18 months to two years’
time, we could see these falls reversed and a rise in house prices, because, I
think, by then inflation could re-emerge. The extent to which this will happen
will depend on how many much of the supply side of the economy has been driven
out of business as a result of the lock down/house arrest.

David Lawrenson is author of two books for landlords; Successful
Property Letting – How to Make Money in Buy to Let” and “Buy to Let Landlords’
Guide to Finding Great Tenants” as well as a book for tenants called “Tenants’
Guide to Successful Renting”.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – David Lawrenson: How I readied myself for Coronavirus (and other downturns) | LandlordZONE.

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Inquiry into coronavirus support for PRS

admin    Uncategorized     agents

An inquiry into impact of the coronavirus crisis on homelessness, rough sleeping and the private rented sector has been launched by the Housing, Communities and Local Government Committee.  It will examine how effective government support has been in supporting individuals in the private rented sector or who are homeless.  It will also look at what strategies will […]

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Wales fees ban: regulations on default fees to come into force next week

admin    Uncategorized     agents

New regulations on the maximum allowable level of fees landlords in Wales can charge when a tenant defaults on their contract will come into force next week. The tenant fees ban was introduced in Wales last September, as part of the Renting Homes (fees etc) (Wales) Act 2019. It has been rolled out in different […]

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‘Renters of homes have fewer rights than if they were renting a sofa or a fridge’

admin    Uncategorized     agents

This is the view of Labour’s new Shadow Chancellor Anneliese Dodds who, LandlordZONE has discovered, has big plans for the housing market were she to make into No.11.

Labour’s new Shadow Chancellor is in favour of greater regulation of the private rental market, significantly increased rights for tenants and a beefed up role for council licensing of the private rental sector, LandlordZONE can reveal.

Anneliese Dodds, who was promoted by new Labour leader Kier Starmer recently to Shadow Chancellor only three years after becoming an MP, is also the Labour MP for Oxfordshire East.

But the 42-year-old has been active within the Labour party for many years and her official profile on the LabourList website, which has recently been updated, includes points of view that are likely to worry many landlords already battered by recent reductions in tax relief, evictions being suspended, increased costs tenants who are struggling to pay their rent.

Dodds says she wants to see the next Labour manifesto give local authorities more powers to “root out rogue landlords and maintain the balance of housing between family homes and houses in multiple occupation”.

Maiden speech

And during her maiden speech to parliament just after being elected as an MP, Dodds said: “Renters of homes have fewer rights than if they were renting a sofa or a fridge.

“Renters need stronger rights, and they need, above all, a system that recognises houses as homes—as places to live and not merely investment opportunities.

“We also, of course, need to unlock the potential of our communities and not allow them to be asset-stripped.”

And one of the people who Dodds says inspired her to become an MP is fellow Labour MP Karen Buck because of her work to “improve tenants’ rights by enabling them to complain against poor landlords and seek compensation if their landlord fails to act”.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – ‘Renters of homes have fewer rights than if they were renting a sofa or a fridge’ | LandlordZONE.

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My tenant has unfortunately passed away in hospital?

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My tenant unfortunately passed away in March after she was hospitalised in February. Obviously things are difficult and  I haven’t received any rent for February to date.

I am currently still awaiting for her daughter to hand back the keys to the house.

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End of Tenancy, Tenant’s Belongings, Tort Law and “Lockdown”?

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Hi, Here is a dilemma that many of us on Property118 might likely face in the coming weeks of these very challenging times.

The 12 month fixed term tenancy ending this week, current Tenant contacted 6 weeks before tenancy end date he verbally informed agents of the purchase of a new home and won’t be renewing the tenancy.

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Police won’t accept it’s theft?

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In a nutshell (as I’ve had nearly two months of stress and anxiety), agent I used 2 years ago without problem, found tenants for me in February. The tenant paid her 4 months rent up front plus deposit, plus 4 months council tax up front –

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LATEST: Suspend gas and electrical safety certification for six months, says NRLA

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Landlords’ association says difficulties sourcing engineers and worries among tenants about letting people into their homes mean safety certification, like MOTs for cars, should be waived until the crisis is over.

All gas and electrical safety certification for private rented homes should be automatically extended for six months, the National Residential Landlords Association (NRLA) says.

The organisation says its poll of landlords found that 38% have been struggling to source maintenance contractors and that a third cannot complete safety and essential maintenance work because they or their tenants are self-isolating.

It also says many tenants are simply worried about letting tradespeople into their homes.

Also, the NRLA claims that there is a precedent for a safety certificate waiver following the Coronavirus pandemic; namely that the government recently did the same for vehicle MOTs.

This would give landlords the time to ensure that routine but legally binding checks can take place at a point when the danger of spreading the virus in rental properties is at least reduced, it is claimed.

Electrical safety

As well as gas safety certificates, the NRLA is calling on the Government to delay until next year the introduction of new routine Electrical Installation Condition Reports which are due to come into force from 1st July.

 “Whilst
landlords should ensure that urgent work to ensure properties are safe for
tenants is carried out, routine maintenance and checks need to be delayed to
prevent the spread of Coronavirus,” says Ben Beadle, Chief Executive of the
NRLA.

“Extending the life of gas and electrical
safety certificates will protect landlords and tenants from unnecessary contact
and provide landlords with legal protection from enforcement action where they
are simply unable to get such work undertaken through no fault of their own.” 

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Suspend gas and electrical safety certification for six months, says NRLA | LandlordZONE.

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Landlords call for extension to safety certificates

admin    Uncategorized     agents

Landlords are calling for a six-month extension to the validity of all gas and electrical safety certificates to cover for the impact of the coronavirus.  This comes in response to a survey showing that 38 per cent of landlords are struggling to source maintenance contractors to undertake required work and just over a third are having difficulties […]

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