LATEST: High Court favours commercial landlords in Covid rent arrears case

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Tenant protections imposed during the pandemic have meant delays in legal claims and arrears in rent payments, but this does not mean that the rent is not due, says Tom Entwistle

During the present pandemic significant restrictions have been placed on landlords and their ability to recover outstanding rent.

But the law says that landlords in England and Wales still retain the ability ultimately to recover rent and other sums due to them under commercial contracts. Lease agreements signed between landlords and tenants still stand despite coronavirus legislation.

This is despite government guidance and practice directions restrict some of the landlords’ options in England and Wales.

Please note, the options open to landlords in Scotland and Northern Ireland are different.

It all depends on specific circumstances, but landlords’ options on rent recovery could include recovering sums owed from former tenants, guarantors, recovering rent directly from subtenants, or through debt recovery proceedings.

On 19 June 2020, the government published a code of practice for landlords and tenants of commercial property across the UK, but the code is voluntary and is not legally binding.

The main thrust behind the government’s intention in issuing the code was to promote “transparency and collaboration” between the parties and to encourage landlords and tenants to act “reasonably and responsibly”.

Avoiding rent

Perhaps understandably given the present situation tenants have tried to delay or avoid paying rent, but a recent High Court decision held that a shopping centre landlord was entitled to summary judgment against its retailer tenant for non-payment of rent and service charges.

The tenant’s rent arrears were built-up since April 2020 while the government’s COVID-19 measures restricted trading, and the tenant came up with several reasons why they thought rent payment should be avoided.

The Court’s decision in in Commerz Real Investmentgesellschaft v TFS Stores (April 2021) has been welcomed by commercial landlords after the tenant put forward several weak legal arguments to avoid paying rent during the Covid pandemic.

The tenant (which trades as The Fragrance Shop) argued that the government’s code of practice for commercial property relationships during the Covid pandemic meant court proceedings had been premature, but the Court refuted that argument making clear that the code is non-binding and does not alter legal relations between landlords and tenants.

In addition, the court was satisfied that the landlord had made significant efforts to engage with the tenant, actions that were in-line with the code and practice directions.

No loophole

Another argument put forward by the tenant was that government measures brought in to restrict enforcement by landlords – restrictions on forfeiture, winding-up and CRAR – meant a landlord is not allowed to exploit “loopholes” to recover rent through a money claim. But the Court held there was no “loophole” being exploited – the legislation does not restrict money claims.

In yet another argument, the tenant argued that the insurance provisions of the lease required the landlord to insure against loss of rent for notifiable disease and/or government action.

The tenant argued that the landlord should claim under their insurance policy to cover the rent arrears, or should there be no policy in place, then the tenant had a damage claim for failure to so insure. However, the court held here that the lease did not place such an obligation on the landlord and even if there were such an obligation, it would not necessarily follow that the insurance policy should cover losses of the tenant (as opposed to those of the landlord). 

Rent suspension clause

Finally, the tenant argued that a rent suspension clause in the lease should be interpreted such that the rent payments were suspended during the Covid-19 pandemic. However, the Court rejected this argument as the wording of the particular rent suspension clause in the lease was considered to apply to physical damage to the property only, not when closed due to legal requirements such as a government ordered lockdown.

This High Court decision will be welcomed by commercial landlords clarifying the position and reminding tenants that whilst the government’s COVID measures restrict many enforcement methods, the overall contractual lease obligations of tenants remain unchanged and tenants can still be pursued through the courts.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: High Court favours commercial landlords in Covid rent arrears case | LandlordZONE.

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Sheriffs to the Aid of Commercial Landlords

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In the last week, there have been a smattering of cases where judges have agreed with Shergroup’s interpretation of the law – and that is commercial landlords can go ahead and sue their tenants for rent arrears and other charges arising under a lease.

The post Sheriffs to the Aid of Commercial Landlords appeared first on Property118.

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How Rick Gannon went from career break to £7m HMO portfolio

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Rick Gannon became an accidental landlord when his first property was in negative equity and decided to rent it out.

Fast-forward a few years and he and wife Lorraine had made a substantial amount on the sale so decided to use the proceeds to buy other properties to rent – with a few ‘flips’ and renovations on the side.

After working in the police force for a few years, one night he got home from a night-shift when his son Ben, who was born with quadriplegic cerebral palsy, was nine.

“He asked me why he couldn’t play football with his friends at school,” Rick tells LandlordZONE. “I realised I was always at work and wasn’t around to help him, so decided to take a career break.”

Rick started a disabled football club for Ben and other youngsters, fundraising to pay for their specially adapted wheelchairs. “It changed their lives and Ben could say that he could play football too.”

Matched income

Twelve months later, Rick had matched his former income by focusing particularly on HMOs and decided to go into property full-time.

“The only experience I’d had of HMOs was arresting prostitutes and drug dealers in them,” he laughs. “I decided to go for professional tenants instead.”

Nine years later and the couple have a £7 million portfolio with 140 tenants. Although he still buys property, Rick says he has no big acquisition plans and is concentrating on creating wealth for his children. He may be less hands-on these days, with 10 staff to run his portfolio, but Rick has kept busy, becoming a published author, tech start-up and training company founder.

“When we got to 50 tenants, I started to look for systems to onboard tenants and do property management – then decided to go into business with developers in Bulgaria and set up my own management platform for landlords, gotenant.co.uk.”

Novel approach

Rick has penned three books including House Arrest, a semi-autobiography and 45 Ways to Buy Property. He also runs a training company which teaches students how to run an HMO portfolio.

With 16 HMOs – “five-star, all with Netflix” as well as 27 single lets, a pub, serviced holiday let and 14 garages, mainly around Worcester – Rick believes that it’s his positive relationship with tenants that’s resulted in very low churn across his portfolio.

“I’ve always wanted to help people, creating opportunities for those who can’t get on the housing market – they can save up while they’re in our properties,” adds Rick.

“If landlords do it well with the right motivation, helping people rather than trying to squeeze everything out of them, the private rental sector has a very strong future.”

Read more about HMOs.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – How Rick Gannon went from career break to £7m HMO portfolio | LandlordZONE.

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Q2 Update – Landlord Tax Planning 2021

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In this video interview, Chartered Accountant Andrew Roberts discusses recent and possible new changes to the tax system affecting UK Private Rented Sector landlords with Mark Alexander, founder of the Property118 Tax team.

Learn more about the extra Stamp Duty now payable payable by UK property buyers who reside overseas

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Government funding to help make building a home easier

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New plans supported by over £150 million in new government funding will make it easier and more affordable for people to build their own homes, the Housing Secretary Robert Jenrick has announced today.

The ‘Help to Build’ scheme will ensure that self and custom home building can become a realistic option to get onto the housing ladder through lower deposit mortgages.

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98% of landlords who evict illegally are not being prosecuted, says report

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Generation Rent has urged police commissioner candidates to tackle illegal eviction after it found just 2% of cases resulted in prosecution.

The housing pressure group says that despite a rise in illegal evictions during the pandemic, many police officers called out to incidents wrongly treat them as civil disputes.

The Ministry of Housing, Communities and Local Government recorded 1,040 cases of homelessness caused by illegal eviction in England in 2019-20 – up from 810 the previous year.

However, Ministry of Justice figures show there have been an average of 24 prosecutions for unlawful eviction each year between 2016 and 2019, the most recent period for which data is available.

Generation Rent is calling on candidates standing for police and crime commissioner in the 6th May elections to pledge to improve training in eviction law, record all incidents involving tenants and landlords, and to work closely with councils to prevent unlawful evictions and bring criminal landlords to justice.

Proper funding

It also wants stronger sentencing guidelines and more powers and resources for councils to lead work to prevent illegal evictions. While local authorities and police officers have powers to stop illegal eviction and prosecute offenders, it believes few councils have fully-funded tenancy relations officers to perform this role.

Director Alicia Kennedy (left) says being evicted illegally, often with your belongings dumped on the street, is devastating.

She adds: “We have legal protections for renters for a very good reason, but when the police fail to enforce these and we end up with a tiny minority going to court, renters lose confidence in the law and criminal landlords act with impunity.

“May’s elections are an opportunity for police forces up and down the country to reset their attitudes to illegal eviction and make sure that everyone gets the protection they deserve.”

Read more about illegal evictions.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – 98% of landlords who evict illegally are not being prosecuted, says report | LandlordZONE.

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My battle with Rosinca formerly Mortgage Express?

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I’m about to start a battle with Rosinca Mortgages. Today I woke up and opened a letter from Rosinca, and  I am incandescent because they’re threatening to repossess me. My calm response to my distressed daughter was “Sweetie – let them bring it on”.

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‘We were there for the start of UK’s renting revolution’

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Cast your mind back 25 years to the year 1996 – were you a landlord?

The private rented sector looked very different back then, but change was afoot. The 1988 and 1996 Housing Acts catalysed the transformation of the sector, which has grown from 2.1 million households in 1996 to a projected 5.8 million by the end of this year.

As we emerge from the pandemic and look to what we all hope is a brighter future, it’s a timely moment to reflect on a sector which has evolved beyond recognition over the past quarter of a century.

And we also have a birthday to celebrate. Hamilton Fraser, parent company to LandlordZONE and our insurance partner, Hamilton Fraser Total Landlord Insurance, celebrates its 25^th birthday later this year.

With the five year-year survival rate for businesses standing at around 40 per cent, it is no mean feat that Hamilton Fraser is not only surviving, but thriving, 25 years on from its inception in October 1996.

To mark 25 years in the private rented sector, the company has launched its birthday celebrations by sharing its story of success in The journey – a 25 year history of renting in the UK.

This potted history charts the evolution of the rental sector from its beginnings in the 13^th century, focusing on the 20^th and 21^st centuries and the part that Hamilton Fraser and its partners have played in shaping the private rented sector.

From the launch of its first landlord insurance product in 1996, to being at the forefront of tenancy deposit protection in 2007 and the recent launch of a deposit replacement product, over the years the company has been instrumental in some of the biggest changes involving regulation, reform and redress within the sector. 

Eddie Hooker, CEO at Hamilton Fraser, comments, “We could never have predicted the pace of change we have witnessed over the last 25 years. However, the biggest privilege is to have been a significant part of that evolution.

“We are committed to continued investment in raising industry standards and advocating for support and transparency in our markets. Thank you to everyone who has made Hamilton Fraser the success it is, and for joining us on our 25 year journey.”

Read ‘The journey – a 25 year history of renting in the UK’ here.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – ‘We were there for the start of UK’s renting revolution’ | LandlordZONE.

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When should tenants report an unlicensed HMO?

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A theoretical question for a hypothetical tenant living in an HMO. Let’s assume the tenancy agreement was for one year, commencing on 1st January 2021 and ending on 31st December 2021.

The landlord’s HMO licence is a five-year licence and expires on 1st July 2021 (midway through the tenancy).

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Another huge fine for a Bristol HMO landlord as council intensifies crackdown

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Bristol council has struck for the third time this year with a huge £30,000 fine for a landlord who pleaded guilty to maintenance and safety failures at three HMOs.

Landlord Naomi Knapp of East Street, Bedminster has agreed to pay the sum which includes fines, costs and victim surcharges in £2,000-per-month instalments after revealing that she had been managing 18 rented properties within the city without support.

Details of her poor property management at the three HMOs came out during a hearing at Bristol Magistrates Court, including shocking ‘slum’ pictures taken by the council at the addresses.

During the hearing, Knapp said in mitigation that she had subsequently carried out required remedial work at the houses, had secured the required safety certificates and would rent out the properties along with 15 of her other homes in future via a qualified property management company.

The prosecution of Knapp followed a visit by members of the Bristol City Council’s Private Housing Team last summer to the properties in Dartmoor Street (pictured), St John’s Lane and Wedmore Vale following complaints from tenants.

The properties were found to be in breach of the Management of Houses in Multiple Occupation (England) Regulations 2006 including inadequate fire escape provision, disrepair and other safety breaches. Knapp had also failured to complete promised property upgrades.

Third prosecution

Tom Gilchrist, Bristol City Council’s Private Housing Service Manager, said: “This is the third successful prosecution brought by the Private Housing Team this year.

“We continue to bring to court landlords that fail in their responsibility to adequately manage their multiple occupied properties.

“Naomi Knapp is a portfolio landlord who has been renting property for many years and the magistrates commented that as such she should have the knowledge and experience to act on the issues identified.”

Read more about Bristol’s HMO crackdown.

PIC credit: Google

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