The Covid-19 crisis has put landlords and letting agents – to say nothing of tenants – in a new and completely unprecedented situation. In this article we will look at ways to deal with and help tenants during the coronavirus pandemic. We will also look at what you can do if your tenants cannot pay their rent.
Firstly, understand the tenant’s position
Remember that different tenants will be in a different financial position, so a one size fits all approach isn’t a good idea. Some tenants will be on their normal income, some will be on a reduced income while others may have no income at all. In each case a different problem will need a different solution.
Get in touch and stay in touch
If you haven’t already, it’s a good idea to get in touch with your tenants and then keep in touch with them while the Covid-19 pandemic is ongoing. Tenants may be looking to landlords and letting agents for guidance anyway.
A simple occasional text or email is a good idea. Let them know that they should get in touch with any queries or problems they have with paying their rent if they haven’t already.
Tell tenants about the financial help they can get
The Government has introduced a number of schemes which can help tenants (and others) financially. Some tenants might not know about these so it may help to mention them, as these schemes may mean that they can keep on paying their rent as normal.
Here’s the official Government page, which is regularly updated and which explains Support for those affected by COVID-19.
This page from Money Saving Expert covers many ways tenants (and everyone else) can get help with their finances and paying their bills during the crisis.
Next, if tenants tell you that they can’t afford to pay their rent what should you do about it?
There are broadly two main options to consider: Either you can reduce the rent, or you can agree a rent repayment plan with them. Here’s what you need to know about each option:
Agreeing a rent reduction
Reducing the rent may not seem a very appealing idea, but there are some reasons why it can be an option:
* You will still have some rent coming in, and so still have a cashflow.
* It will reduce the risk of accruing a large debt which the tenant may never be able to repay.
* It will reduce the risk of needing to evict the tenant in the future, and needing to find a new tenant for the property. (These together could easily cost a landlord much more than simply reducing the rent for a few months.)
Reducing the rent can be an especially attractive option where you have a good tenant who you hope will stay into the future.
If you decide to offer a rent reduction aim to agree one that the tenant feels they can afford and agree for what period it will apply. But bear in mind reducing the rent needs to be something you can afford to do as well.
Agreeing a rent repayment plan
The advantage of doing this is that, hopefully, you will get all the rent you are due eventually. The disadvantage is that you may not get any of it, as it is impossible to know what the tenant’s financial situation is or what might happen in future.
If you want to agree a rent repayment plan with your tenant you can either defer rent payments entirely for a period – known as a rent payment holiday – or accept a reduced rent for a period. Then make an arrangement for the tenant to repay what they owe at a later date.
The best approach to a repayment plan is probably to ask tenants to pay what they can comfortably afford to pay each month from now and take it from there.
It’s sensible to have a proper agreement with a tenant about how much they will repay, when and over what period to avoid misunderstandings or other possible problems. Online legal service Rocketlawyer are providing a free tool where you can create a document agreeing a legally binding rent repayment plan with tenants.
Can tenants be evicted for non-payment of rent ?
The Government introduced emergency legislation at the end of March which effectively made evicting tenants impossible for the immediate future. It did this not by banning evictions as such but by raising the notice period landlords must give before applying to a court for eviction from one month to three months. This applies until 30 September 2020 but the period could be extended.
The Government has not said that tenants do not have to pay their rent at all, just that landlords and tenants should aim to come to a reasonable arrangement where necessary.
Eviction notices, either under Section 21 or Section 8, can still be served if required but cases cannot be taken to court for three months. In addition to this there would be extra time to allow the eviction process to move through the court system.
Should you apply for a mortgage payment holiday ?
If you are a landlord with mortgage borrowing you might consider if applying for a mortgage payment holiday would help you to offer a reduced rent or a rent payment holiday to your tenant. The mortgage payment holiday does not necessarily have to be on a mortgage related to the property occupied by the non-paying tenant.
Here’s more information on Buy To Let Mortgage Holidays: How Does The Scheme Work And Should You Use It?
As the situation regarding Covid-19 and the letting business is likely to change without notice it’s important to keep an eye on the latest developments. We’ll publish more new posts to help landlords and letting agents on this blog from time to time.