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Solution for rent arrears during Covid19 and the ensuing court delays

The impact of Covid19 on the economy and every facet of our lives cannot be under-estimated. Major industries have been decimated, businesses have failed, and the whole world has adjusted to the new situation.

Landlords have been badly affected as well, particularly smaller landlords.

The Government has a fair bit to answer for, as far as the private rented sector is concerned and much of it is down to poor communication , or not thinking through the collateral damage of their (admittedly and understandably) rushed decisions to try and stabilise the sector once lockdown came into affect

The first major problem for landlords arose when the government announced a three month mortgage “holiday” for those struggling to make their BTL mortgage payments. The issue was driven by the incorrect use of the word “holiday” when it was actually nothing of the sort - it was just deferring the payment for three months. Tenant charities and action groups jumped on the word “holiday” and started telling tenants that they did not have to make their rental payment, because the landlord did not have to pay their mortgage.

The National Union of Students sent an open letter to the CEO of the National Residential Landlords Association suggesting that student landlords should offer their tenants a 12 month rent amnesty and this filtered through to landlords receiving letters from tenants saying that they had been advised not to pay the rent.

Landlord forums and property facebook groups started to host discussions about tenants not making the rent payment, even though they could afford to.

One landlord reported how all 16 of his tenants sent him a template letter saying that they would no longer be paying the rent during the pandemic, and it would appear that this originated from tenant action groups on facebook which encouraged tenants not to pay the rent, so this landlord would not be alone in receiving such communications.

The Ministry of Housing, Communities and Local Government, (MHCLG) quickly issued a new statement clarifying that it was not a mortgage “holiday” and that all tenants should continue to pay their rent if at all possible … but the damage was done.

On 18th March 2020, the Government announced a complete ban on evictions for a total of three months. As a result, no renter in either social or private accommodation could be evicted from their home. They could still be served notice, but the notice period was now three months.

Then on the 5th June, the government extended the suspension of new evictions until 23 August, making it a total of six months that the eviction ban was in place.

Due to Covid19, the court system essentially shut down as well, meaning that a pipeline of cases started to build up.

On the 1st July, it was announced that the eviction ban would end on the 24th August, but this is far from the end of the problem for landlords seeking to evict tenants.

The huge backlog of cases means that it could be months for a case to get in front of a judge, leaving landlords with a non-paying tenant or with other issues such as anti-social behaviour or domestic abuse issues that cannot be resolved for a significant time period.

Additionally, cases where possession orders were granted prior to lockdown or where rent arrears have nothing to do with the Covid pandemic will be given priority by the courts.

Whilst it seems sensible for the government to want to maintain tenancies during the pandemic, a “blanket” or “one size fits all” approach generally doesn’t work for private rented sector issues due to the complexity of the landlord/tenant relationship and when tenancies go off-track, it can be financially devastating for the landlord not to receive any rental payment for a long period with no hope of getting the tenant removed.

Landlord eviction expert Paul Shamplina of Landlord Action said in a recent NRLA webinar that he did not think that landlords could expect to see the courts getting anywhere back to normal until the end of the year, bearing in mind that they were not functioning efficiently before the pandemic! Anecdotal evidence suggests that smaller landlords are less resilient to such challenges.

Baroness Altmann, a Conservative Peer, is aware of what she calls the “plight of small landlords” She wrote in a recent article for “Conservative Home”:

“Consider a buy-to-let landlord, who owns just one property, with a tenant who did not pay rent for a few months before lockdown and has not paid since. Having already had to wait to bring a case to court, and then faced delays with getting an order enforced (on average about 6 months) followed by five months of the repossessions ban, the landlord will have received no income for over a year. Yet they must still meet costs such as licensing fees, insurance, and maybe even utility bills for the property. It is therefore hardly surprising that 29 per cent of landlords are reporting some degree of financial hardship according to the NRLA”.

So, what other options are there for landlords with non-paying tenants or those that wish to sell their buy to let property and who cannot wait for a court hearing or vacant possession?

What is the value of a property with sitting tenants?

Open Property Group actively invest in properties and landlord portfolios with sitting tenants. As professional property buyers, we have a large cash fund at our disposal to acquire properties and we can make you an offer for your property within 48 hours of you getting in contact with us.

We may not even need to visit your property to make an offer on it, which could be another consideration if you have tenants that refuse to allow access.

We are a family-run business with a lot of experience in this area and we are happy to talk through your individual situation to see if we can assist in any way.

So do not hesitate to get in touch for your no-obligation offer. We might be able to free you of a problem and allow you to focus on things that are more important to you right now.

Published on 10th July 2020

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