Jun

OPINION: Despite government support, many landlords feel they have drawn the short straw…

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Whilst the government has shown landlords support, both commercial and residential landlords, laws currently being passed are putting both on the back foot, by preventing them from pursuing rent arrears claims and evictions.

Covid-19 is causing
widespread devastation across the whole country as tens of thousands
of people die earlier than they should, and a nationwide lockdown has
an impact on the economy that will take years to overcome. The
coronavirus pandemic is going to be the biggest post-war crisis our
country has seen, not withstanding its effect on the world-wide
economy – there is no doubt we will all be the poorer as a result
of this.

Firms are in danger of going out of business, and doubtless many will; families are in mourning, thousands will lose their jobs and landlords are facing unprecedented challenges – residential landlords are trying desperately to balance their desire to show human compassion while covering their costs, and commercial landlords want to help their business tenants survive, while balancing this with their own cash flow problems.

Some landlords have
really drawn the short straw: in particular those who were in the
process of evicting for legacy rent arrears prior to the lock-down,
and they now find themselves housing tenants for free, long-term –
the eviction bans, it seems, are constantly extended. Other landlords
fear that their tenants are avoiding paying rent, even when they
could afford to do so.

There’s a
compromise to be had somewhere: between the two opposing camps of
those landlords who want to stop the worst cases of deliberate rent
non-payment of rent, those tenants taking advantage of the situation,
and the government’s actions to support tenants, informed by
tenants and tenant lobbying groups.

Commercial landlords
in particular are worried about the new laws on rent collections,
with a bill set to pass through the House of Lords which will further
weaken their position: these landlords could soon be blocked from
perusing business rent arrears for at least 90-days

The Corporate
Insolvency & Governance Bill includes in its rubric a temporary
ban on landlords using winding up petitions where a tenant company
cannot pay its rent bills due to the coronavirus. It prevents
landlords from recovering rents, unless they are overdue by at least
90 days. Ordinarily, commercial landlords can pursue rents arrears
after seven days.

Commercial
landlords, and this includes many small private investors, argue that
this new legislation tips the balance of power too far in favour of
the tenant. And this, coupled with the temporary ban on their ability
to evict corporate tenants, who refuse to pay their rent, will overly
weaken the landlord’s negotiating position when it comes to
valuations and lease renewals.

With a new quarter’s
rent due on the June 24^th quarter day, many commercial
landlords are getting very concerned that they will receive even less
in rent payments than they did in March. It has been estimated that
only around 50% of the rent due from businesses in the UK had been
collected 10 days after the March quarter deadline. This compares to
around 70% in a normal year.

Landlords fear that
this latest bill will incentivise corporate tenants to not pay rent
even if they can afford to, so for many smaller landlord investors,
and some of the struggling mega corporates, the suspension of rent
payments, it is argued, could push them over the edge into
insolvency.

Residential
landlords appreciated that the Ministry of Housing, Communities and
Local Government recognised early on the vital role they play in
supporting their own tenants through the crisis by announcing a
series of measures to help both landlord and tenants, including:

Changes to
Local Housing Allowance rates to cover 30 per cent of market rents,
helping tenants on low incomes
A commitment to
cover up to 80 per cent of wages of furloughed workers, a critically
important decision, enabling more tenants to continue to pay their
rent and their bills during the outbreak. The self-employed also
qualify for payments of up to £2,500
An extension of
the mortgage ‘holiday’, initially offered to homeowners to buy
to let, allowing landlords (although obviously only those with
mortgages) to let tenants defer
rent payments
The deferral of
VAT payments, meaning no business had to pay any VAT in March, April
or May An extension to the notification period for repossessions to
three months, with courts suspending all possession hearings for 90
days
Loosening of
the rules around Right to Rent checks, allowing documents to be
submitted electronically.

These concessions
are all in addition to the loans, grants and rates reliefs announced
in the budget. However, many private residential landlords fail to
benefit from much of this. Those without mortgages still need to
cover their costs and many rely on their rental income to fund their
living.

Student landlords in
particular are struggling when they find their tenants have gone home
to live with their families, as the universities and colleges closed
down. This could leave landlords with council tax bills to pay, while
many of their tenants think they don’t have top pay rent, even when
they are contracted to do so, and are refusing payments. Not only
does this seriously compromise the student landlords’ position,
they have perhaps even greater worries for next term, for the
possible dramatic reduction in foreign student numbers. It could mean
that many student landlords will leave the sector for good.

The National
Residential Landlords Association (NRLA) is making representations to
government for extra help for struggling residential landlords left
with empty homes, and it is calling for landlords of houses in
multiple occupation to be given council tax relief.

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