Double whammy threatens landlords with cash-flow issues…

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Rent payments:

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 30^th 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 31^st of
July, can defer these self-assessment payments until the 31^st
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.

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