The guidance provided here is correct at the time of writing, but could become out-of-date very quickly depending on the situation and any new information provided by the government, the NHS or Public Health England.
In this blog I’ll be looking at the Covid-19 emergency and how this might impact landlords, both on residential property and commercial property.
I’ll start first with commercial property, mainly business premises. Businesses have undoubtedly suffered from the current situation. With the public being told to stay indoors, non-essential stores to close and with everything in lockdown, businesses will be wondering what to do about their rent, bills, taxes and keeping afloat during this troubling time.
The basic premise is that tenants do not have a legal entitlement to a ‘rent holiday’. A rent holiday is essentially a period of time in which a tenant may not have to pay any rent.
Landlords could, in theory, enforce their right to receive rent for letting out their commercial property. But if a business is not open or making any profit, how will they be able to pay? The Government has been watching this area very closely and have decided to give businesses facing difficulty paying their rent extra protection.
The UK Government announced on 23 March 2020 that it will be introducing a suspension of the ability to take forfeiture action for commercial leases such that business tenants who cannot pay their rent (which is defined to include all sums payable under a lease) will be protected from forfeiture. This means commercial tenants will be protected from eviction if they cannot afford to pay their rent due to Coronavirus.
These measures, included in the emergency Coronavirus Bill currently going through Parliament will mean no business tenant can be forced out of their premises if they miss a payment in the next three months (ending on 30 June 2020 – a date capable of being extended by the government).
Of course, the UK Government is also mindful of the issue landlords face with cash flow and mortgages and will continue to be in dialogue with them.
For further information read the Government’s guidance on Extra protection for businesses with ban on evictions for commercial tenants who miss rent payments.
Some tenants have been approaching their landlords with proposals for sharing the rental risk and reaching voluntary arrangements about rental payments due imminently.
Tenants may request a reduction in rent or a re-gearing of the lease terms to take the pandemic into account. However, there is nothing under the law that would require the landlord to honour that request. However it’s hoped that landlords will be sympathetic to the current situation to negotiate rent concessions or deferrals. Many landlords and businesses are being watched by the general public about their conduct and general behaviour during this time. It may be in the landlord’s best interest to accommodate some of the tenant’s requests.
Tenants may be worried about being able to pay their rent. With many people being told to stay home and some not able to work, people’s income may have stopped entirely or have severely reduced. This is affecting many tenant’s ability to pay rent.
Rent and evictions
Under usual circumstances, landlords could evict tenants who don’t pay their rent. And even during the Covid-19 crisis, tenants do not have a general right to a ‘rent holiday’ (as with commercial tenants). But the government is aware of the situation and announced a radical package of measures to protect renters and landlords affected by coronavirus.
As a result, no renter in either social or private accommodation will be forced out of their home during this difficult time.
Landlords will not be able to start proceedings to evict tenants for at least a 3 month period.
However the government also recognises the additional pressures the virus may put on landlords, and have confirmed that the 3 month mortgage payment holiday will be extended to landlords whose tenants are experiencing financial difficulties due to coronavirus. This will alleviate the pressure on landlords, who will be concerned about meeting mortgage payments themselves, and will mean no unnecessary pressure is put on their tenants as a result.
It’s important to note that this is a deferral and not a write-off of any rent arrears or mortgage payments. At the end of this period, landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances.
For further information read the Government’s guidance on Complete ban on evictions and additional protection for renters.
Maintenance, repairs and inspections
The Government has not yet provided clear guidance on the landlord’s obligations to keep the property repaired or their licensing obligations.
With people self-isolating, many tenants may refuse entry into the property unless it’s something specifically urgent or affecting the liveability of the property. Landlords still need the tenant’s permission to enter the property. But this has raised concerns among the landlord community who need to comply with their legal obligations such as gas or electrical safety checks, installation of smoke alarms, renewal of Energy Performance Certificates.
The general presumption is that landlords still need to carry out these obligations. However if a tenant has refused entry to the property for health reasons or they’re self-isolating, then make sure to get this in writing or document it. Local authorities are unlikely to take enforcement action at this time against landlords who have tried to comply with their legal obligations but have been unable to due to the pandemic.
Landlords should also notify tenants that there will be a delay to non-essential repairs or maintenance for the time being and avoid all unnecessary visits to the property.
All the current proposals are to do with regulated tenancies (ie Assured Shorthold Tenancies). Lodgers are considered excluded occupiers and have a residential licence as opposed to a tenancy. Therefore landlords could in theory evict lodgers by using the standard contractual procedures (ie providing notice).
During these unprecedented and unpredictable times, it seems that both landlords and tenants will have to share some of the burden. The virus has affected everyone and it may be a case of working together in order to come to an agreement and resolution.
Landlords should apply common sense to the situation and avoid unnecessary or coarse action. Many people are watching to see how landlords will react to the situation so it’s imperative to use reason and common sense.
Watch this space for any new updates and I hope you all stay safe and healthy.