THE EFFECT OF COVID-19: RESIDENTIAL TENANCIES

Are you a landlord or tenant of private accommodation and struggling to pay or obtain rent due as a result of the COVID-19 (Coronavirus) pandemic? Have you heard that home-owners are being offered mortgage payment holidays and are you curious if there are similar measures in place to help you?

We reported on the anticipated policy response from government in our earlier briefing note: ‘The Effect of Covid-19 on Landlords and Tenants’, dated 25 March 2020.  This briefing provides an overview of the new position now that the Coronavirus Act 2020 is in force.

We are here to help you

We are currently facing extraordinary circumstances. Although this briefing note is intended to give you an overview of landlords and tenants positions, your circumstances may require tailored advice.

We have put in place contingency plans so that we continue to stand ready to assist you notwithstanding the stringent health measures now put in place by government.

If you have any questions or concerns about the issues raised below or by your situation, please contact our office on 020 7034 4200 or at disputeresolution@streathers.co.uk.

The Coronavirus Act 2020 and Tenancies

The Coronavirus Act 2020 (Act) is an act of Parliament that grants the UK government emergency powers in order to deal with the current crisis we face.

Amongst its provisions, the Act aims to accommodate landlords and tenants affected by the pandemic.

The Act applies to the vast majority of private and social housing tenancies. It does not apply to licences to occupy properties or to tenancies outside the statutory regime of assured shorthold tenancies created by the Housing Act 1988 (as amended); for example, tenancies with an annual rent in excess of £100,000.

Key Provisions of the Act

The Act accommodates landlords and tenants as they prepare for the challenges of the coming weeks and months.

Essentially, the Act stays possession proceedings with effect from 27 March 2020. Some elements have now been amended to bring clarity and the amendments take effect from 18 April 2020.

The key provisions include:

  • A landlord must now give tenants a three-month notice period for all notices served between 26 March 2020 and 30 September 2020 before they can regain vacant possession of a property by Court proceedings.
  • The stay imposed by the Act does not preclude the issue of claims, but simply stays claims.
  • Parties to possession proceedings can make applications for case management directions, where the parties agree them.
  • The stay on possession proceedings does not apply to a claim against trespassers.
  • There is a general suspension of enforcement of all possession orders for at least 90 days from 27 March 2020.
  • Protection for landlords as the 3 month mortgage payment holiday is extended to buy-to-let mortgages.

What does this actually mean?

The Act balances the interests both of landlords and tenants.  It does so by ensuring that landlords’ existing possession actions are suspended, though still permitting them to continue giving notice of future actions.  On the other hand, it prevents tenants becoming homeless during the Coronavirus pandemic at a time when government advice is to stay at home and not to attend property viewings.

Landlords, but especially tenants, should be aware the Act does not:

  • Change or stop the tenant’s liability for rent. Tenants should continue to make payments (if possible) in accordance with their tenancy agreement.
  • Invalidate any existing notices of possession which were served before 25 March 2020.
  • Invalidate any existing possession orders.
  • Prevent the landlord from pursuing alternative debt collection methods on the tenant for any rent arrears, e. serving a statutory demand for unpaid rent, which is the first step in bankruptcy proceedings.
  • Excuse either party from performing its obligations under the tenancy agreement, whether for example the landlord’s statutory or contractual duties for repair and health and safety compliance or tenants’ duties to maintain fixtures and fittings.

I am a tenant struggling to pay rent, what can I do?

  • Communicate with your landlord or their letting/managing agent as soon as you consider you may be unable to pay your rent due to the Coronavirus pandemic. You may be able to work together on a payment plan.
  • You should ensure that you are claiming all you are entitled to from the government’s financial support schemes.
  • Continue to notify your landlord promptly as soon as you become aware of any essential maintenance required by the property and ensure that you follow the government’s health advice if contractors visit your property.
  • Remember: the provisions of the Act only delay the landlord’s ability to recover possession of the property and any rent arrears (and potential interest) will continue to accrue in the meantime and will still be payable.

I am a landlord not receiving rent from my tenant, what can I do?

  • In the first instance, consider your own financial position with a view to any mortgages or any additional loans that may be affected as a result of not obtaining rent from your tenant.
  • You may also want to check the terms of any rental guarantee arrangement or loss of rent insurance cover you have as part of your landlord insurance policy to establish whether it covers the current unprecedented circumstances.
  • You should, if possible, speak to your tenant regarding their financial situation and see if there is a way to navigate the situation as fairly as possible for both parties if difficulties arise.
  • You can still sue for unpaid rent, even if you do not seek to terminate the tenancy. This may be a better alternative for a landlord given the current restrictions if a debt action is proportionate, as it may be difficult to locate a new tenant in the current circumstances.
  • If you have served your tenant with a notice, you are still able to commence possession proceedings, once the period of notice has expired. However, the reality is that although you are able to commence proceedings and the Court may allow the claim to be started, it would then most likely be stayed for the required 90 day period.
  • If a notice has expired and the tenant remains in occupation, consider whether to accept rent, as this could be construed as creating a new periodic tenancy. Alternatively, instead of accepting rent the landlord may be able to claim a sum of money from the tenant called ‘mesne profits’. The starting point is usually the same as the rent that the tenant was paying under their tenancy so long as that was the fair market value for occupation of the property.
  • If you are unable to reach a solution with your tenant, you should seek legal advice.
  • Remember:
    • Landlords should not take evictions into their own hands, for example by entering and changing the locks of the property to re-gain possession. This will still be deemed as an unlawful eviction and could carry criminal sanctions.
    • Landlords should also be aware that they have the same responsibilities and legal obligations for health and safety and repairing standards throughout the coronavirus pandemic. Landlords should therefore ensure that properties continue to meet the required repairing standards and that, urgent, essential health and safety repairs should be made in line with the government’s guidelines.

 Streathers Solicitors LLP

22 April 2020

Contact Us

To discuss how we can help, please call our office on 020 7034 4200 and ask to speak to a member of the Dispute Resolution team.

*The Briefing Note reflects the position as at the date of publication. The information in this Briefing Note is not intended to amount to legal advice to any person on a specific matter or case. You are advised to obtain specific, personal advice from us about your case or matter and not rely on this Briefing Note.

 

 

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