The coronavirus pandemic has had a massive effect on the livelihoods of most of the world’s population. One of the most important things in life is the place you choose to live, and what to do with property that you own. It must be appreciated that renting property during this strange year can bring new and worrying pressures, but this goes both ways. Landlords rely on people paying their rent to make money; those renting will sometimes need a helping hand from their landlords in order to keep a roof over their heads.
For the past few months the UK government have given renters new protections to stop them being evicted, but what options to landlords have and how can they plan for the future?
Residential Tenancies
A landlord must give tenants three months’ notice for all notices served between 26 March 2020 and 30 September 2020 before they can reclaim vacant possession of a property by court proceedings. These dates are subject to review, however, and may be extended. These three months are there to allow the tenant adequate time to find a new living arrangement.
Also, there is a general suspension of enforcement of all possession orders from 27 March 2020 to (currently) 23 August 2020, meaning that landlords are unable to for their tenants to leave via this order for now.
However, this does not mean a landlord is completely forbidden from issuing a possession claim, it can still be done, there is just likely to be a wait before it can be acted on by the Court.
It is also important to remember, from a landlord’s point of view especially, that the changes to residential tenancies implemented by the Coronavirus Act do not invalidate any existing notices of possession served before 25 March 2020. They would, however, need to act before it expires which means it would be best to issue the claim without delay.
What is more, these provisions do not apply to contractual tenancies, licences or tenancies granted in the course of employment. There is also no restrictions in relation to claims against squatters or trespassers.
What about Commercial Tenancies?
Again, landlords will be unable to forfeit a lease and commence possession proceedings for failure to pay rent or other sums, including service charges and insurance rent between 26 March 2020 and (currently) 30 September 2020.
The act applies to tenancies protected by the Landlord and Tenant Act 1954 and to leases which have been ”contracted out” of the protection of the 1954 act. The legislation does not apply to short leases – i.e., leases for less than six months.
The act defines rent as ”any sums a tenant is liable to pay under a relevant business tenancy”. This includes all basic rent and other payments payable in accordance with the terms of the lease such as service charge, insurance and administration charges.
In yet more support for renters, there has also been a conditional ban on using insolvency procedures against companies unable to pay debts due to Covid-19. This includes a temporary ban on presenting winding-up petitions from 27 April through to 30 September 2020, where a company cannot pay rent due to impact of the pandemic and associated infection control measures.
The provisions are not ‘all powerful’
However, the Coronavirus Act does not waive or even suspend the tenant’s liability to pay rent under a lease. Tenants should continue to make payment (if possible) – the act simply prohibits forfeiture for the given period of time.
Landlords will be able to forfeit leases for both unpaid sums during the moratorium period and for any unpaid sums that become due after it is lifted (this includes any accrued interest).
The act only prevents landlords from forfeiting leases for rent arrears; leases can still be forfeited where a tenant breaches other covenants contained in the lease, such as tenants’ duties to maintain fixtures, repairs and fittings etc.
Unlike the rules for residential tenancies, commercial lease provisions will apply to existing proceedings that have commenced before the moratorium period in relation to rent arrears. No orders for possession will be granted by the court before the end of the period.
Other solutions for the recovery of rent such as pursuing guarantors (including any liable under Authorised Guarantee Agreements) and withdrawing from a rent deposit are still available to landlords.
Service Charges?
One additional point to note is that landlords may be incurring service charge outlays during the moratorium period. In these circumstances, claims to recover service charges can still be issued and judgements obtained.
What are the courts doing?
The courts remain open and claims are being processed in the normal fashion. Courts are now adjusting and utilising technology to ensure hearings continue to take place.
What can landlords do in the meantime?
Act now! Serve the notice if you have to, issue the claim if you have to, now! Bear in mind the suspension is not a ban, it is a stay, so when it is over, you will be in a queue. So you need to get in there quick!
While it is judicious to remain mindful of the challenges many tenants will be facing due to the Covid-19 lockdown, landlords should not be discouraged from continuing to exercise pre-action obligations they would usually carry out.
Doing this puts a landlord one step ahead and at the front of a potentially long list of creditors once debts can be pursued. A landlord can still issue an appropriate notice for possession and start the process of eviction, once the moratorium has expired.
Seek legal advice
Obtaining legal advice and taking a proactive approach now could prevent expensive, time-consuming litigation in the future. We are open and ready to take on your case today!
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