Jamieson Alexander Landlord and Tenant Coronavirus Update – 13:30 on 20 March 2020
This week has been a whirlwind of change for everyone across the Country and the World.
In particular in England and Wales radical changes have been brought in surrounding residential properties, both for homeowners and rental property. In brief, this weeks key changes so far are:
- No new possession claims may be brought against tenants in England and Wales;
- Mortgage lenders agree to provide “payment holidays” to borrowers, in certain circumstances
No new Possession claims
The most alarming news for some Landlords this week has been the announcement that with immediate effect no new Possession claims can be brought to evict tenants. The Courts have been in consultation with Government in respect of proposed emergency legislative changes surrounding possession proceedings. Whilst more detail is awaited, it appears to be common ground that with immediate effect the Courts will not be processing or issuing any Possession Claims for at least a three months period from now.
Whether Landlords had prior intentions to commence Possession proceedings before the Coronavirus crisis hit appear irrelevant. It seems that Landlords seeking to regain possession of their rental properties will, for the foreseeable future, have to wait. Regardless of whether vacant possession is sought on the basis of a breach of tenancy by the Tenant or simply because the Landlord needs the property back to occupy themselves or sell, it would appear that no further possession claims will be issued until further notice.
Naturally this is likely to cause problems for Landlords where Tenants stop paying their rent.
It should be noted that Tenants will remain liable for rent regardless of whether they have stopped paying for a Coronavirus related reason or not, as it stands at present. How this will be reconciled in the future with lifting the prohibition on Possession claims remains to be seen, but it is possible that Government will introduce longer rent arrears requirements for section 8 Notices, or potentially a waiver of the right to utilise the section 8 Notice procedure for arrears that arose during this current crisis. Regardless, it would seem to be inevitable that the Tenants will ultimately remain liable for such rent and any resultant money judgment against them in the future will include any arrears accruing during the crisis. Whether such judgments can be successfully enforced against impecunious Tenants is another matter entirely.
Mortgage Payment Holidays
Lenders owned by the Lloyds Banking Group and the Royal Bank of Scotland (RBS) as well as TSB, Virgin Money, Clydesdale Bank and Yorkshire Bank have all so far this week announced, following the Chancellor Rishi Sunak’s “unprecedented packaged” of Government lacked loans publicised on 17 March 2020, that they will support Mortgage customers who are experiencing financial difficulty because of the Coronavirus. Lenders will offer customers the option of deferring mortgage payments for three months where those customers are unable to make the required payments.
It is hoped that further details will be provided by the Chancellor later today, to give clarity to which Mortgage customers would be eligible for the payment holidays. UK Finance (the banking trade body) has revealed some further details since, including a “fast-track” system for approval. UK Finance has made clear however that not everyone will be granted a payment holiday, and any unpaid interest will still be recovered by the Lenders later on, but the payment holidays will not adversely affect individual credit ratings.
The Government have indicated that such payment holidays will be extended to Buy to Let mortgages only where the Borrower is able to show that their Tenants are in financial difficulties because of the Coronavirus crisis. What thresholds will be applied to determine whether a Tenant or a Homeowner is in financial difficulties because of the Coronavirus outbreak remain to be seen.
Indeed it is conceivable that some Tenants will simply stop paying rent because their Landlords are unable to do anything about it at present, even if the Tenants are not facing financial difficulty because of the Coronavirus crisis. Whether such circumstances would still entitle Landlords to a mortgage payment holiday remain to be seen, although as an aside the drop in income for such properties, regardless of whether there are mortgages to pay or not, is likely to hit some professional landlords hard.
As soon as any more detail becomes available we will endeavour to relay further and updated advice to our clients.
The overall message from Government and the Courts is for Landlords and Tenants to open up lines of communication at this time. Speak to your tenants, find out their position and whether they are likely to be financially affected by the Coronavirus outbreak. If they are going to face difficulty paying their rent, the sooner Landlords are aware, the sooner steps can be taken to mitigate the effect of reduced or no rental income, whether by arranging a Payment Holiday with any lender, or alternative financial arrangements.