Thousands of landlords are facing an uncertain future. Coronavirus has caused some tenants to lose their jobs, meaning they may struggle to pay rent.
Many buy-to-let owners are confused about what their obligations are to tenants at the moment and what financial support they can claim to stop their income from drying up during the pandemic.
Here we answer some key questions affecting the rental market, from whether landlord insurance covers coronavirus to when running a buy-to-let counts as being self-employed.
Landlords’ repair obligations have not changed in light of the coronavirus outbreak. The Government has advised all households to practise social distancing so it may not be advisable for landlords to visit properties to assess issues themselves. An alternative option could be to do so remotely via video call.
Chris Norris of the National Residential Landlords Association, a trade body, said some landlords were having trouble securing contractors at the moment, which could make it hard for them to ensure their property met legal requirements. He advised buy-to-let owners to keep records of their efforts if they are not able to resolve maintenance problems.
The Government has said that tenants and landlords should take a pragmatic approach to non-urgent issues. “That means, provided a landlord can show they have taken all reasonable steps, they are unlikely to be considered in breach of their duties,” Mr Norris said.
The Government has made it clear that tenants should “continue to pay rent and abide by all other terms of their tenancy agreement to the best of their ability”.
Tenants who have lost their jobs could seek support from the benefits system. However benefits payments are low and in cases where renters are unable to pay, property owners could make use of the three-month mortgage holiday currently on offer in order to give them some breathing space.
Mr Norris said tenants and landlords doing this would still need to agree a suitable schedule for the repayment of the rent that had been suspended.
The Government has said that landlords can still evict tenants but have extended the notice period they must give from two to three months. The courts have also suspended all existing repossession cases for 90 days.
Landlords do not, in general, qualify for support via the Government’s rescue package for the self-employed. This offers freelancers grants covering up to 80pc of their profits should their income dry up because of coronavirus.
“In England they are also not entitled to any of the other forms of business support available,” said Mr Norris. Scottish landlords can make use of an interest-free loan from the Government if they struggle to bring in rent during the pandemic.
Cat Westerling, of estate agency Hamptons, said landlords could be classified as self-employed but it would depend on the level of involvement they have with their properties.
“In addition to fully managing all letting, maintenance and compliance matters a self-employed landlord would likely need to be operating multiple properties, perhaps actively looking to acquire more and generating enough income from this for it to be considered a business or trade,” she said. In this case they may be eligible for a grant.
What other forms of financial support are available for landlords?
Buy-to-let owners who are struggling financially but unable to access a grant could ease the pressure by deferring the payment for their self-assessment tax return. Any tax due in July can be deferred until January 2021.
They could also make use of the scheme to put mortgage payments on hold for three months but could end up with a higher bill at the other end due to mounting interest.
Will taking a three-month mortgage holiday hurt your credit score?
The Financial Conduct Authority, the City regulator, has said it should not.
Experian, Equifax and TransUnion, the three major credit reference agencies, have said customers’ credit scores will be protected when they have an agreed payment holiday in place. Other credit agencies may have different policies.
Does landlord insurance cover coronavirus?
Some policies will pay out if tenants default on their rent. However many will only pay up once the tenant has been in arrears for a certain period of time and a notice has been served to regain possession of the property.
As the Government has said tenants failing to pay their rent cannot be evicted for at least three months, this could leave insured landlords facing delays with their claims, Ms Westerling said.
What’s the best thing to do with an empty property?
The Government has given the property market the green light to reopen and new properties are being marketed and let, however renters may be hesitant about viewing a property in the current circumstances.
Ms Westerling said an alternative could be to organise a viewing via video.
Some people have already signed a lease but are choosing to delay moving in and staying with parents or other family members instead. Others may be unable to move because of health reasons.
Mr Norris said in this case landlords should speak with prospective tenants to discuss a mutually agreeable solution. They could also speak to their utility providers and see if they can temporarily suspend payments while the property is empty.
Will you be charged council tax on an empty property?
At present owners of empty properties have to pay council tax and can be charged up to double the usual amount if it has been unoccupied for two years or more.
“It is unclear what position councils will take where tenants vacate properties early but the tenancy agreement is still in force,” Mr Norris said. Where landlords have concerns they should speak to their local authorities, he added. Councils can decide to give a discount although the amount is up to them.
Can landlords of leasehold properties take a break from their management fee payments in order to offer their own tenants a payment holiday?
Landlords are being encouraged to help out tenants struggling to keep up with payments where they can. These are generally informal arrangements, with the landlord offering to defer rent temporarily rather than cancelling it completely. Rebecca Cleal of law firm Prettys advised that any agreement be put in writing and ideally signed by both parties.
Before you do this you should ask the freeholder if you can take a payment holiday too and stop paying the management fee for a fixed period. “If you fail to pay the sums due without an agreement in place the freeholder could choose to take you to court to recover the sums owed and interest may be charged,” Ms Cleal said. “The freeholder could also terminate the lease if you breach your covenant but it is unlikely they would go down this route.”
What should you do if you’re in the process of making a dilapidations claim against a tenant but cannot access the property because of the lockdown?
Landlords can claim compensation if a tenant has left their property in a dilapidated state. You should complete a schedule of dilapidations to record the state the property was left in.
Ms Cleal said that the absence of appropriate surveyors or dilapidations assessors to carry out an assessment would not act as a defense to a contractual obligation to keep a property in good repair and that landlords should still be able to get compensation.
Below are questions from our readers that Phil Stewardson, one of the Telegraph’s Property Doctors, and Isabelle Fraser, property editor, have answered. Send in your queries for upcoming Q&As to [email protected]
Q. As a landlord, are you allowed to visit an empty property to turn off utilities and carry out inspections or general maintenance? Some insurance policies require that a property is not left unoccupied for more than 30 days and/or that weekly inspections are carried out whilst empty.
Phil says: There are no specific government guidelines about this, but I don’t think anyone can criticise you for attending the property to carry out these tasks, as they are vital for the safety and wellbeing of your property.
You are correct; most insurers require weekly inspections on void properties. Assuming you don’t have a huge distance to travel, I think it is well worth doing this.
I would advise recording the fact you are visiting your property to carry out these inspections. Perhaps produce a tick-list of items you have checked, such as window and door locks, gas and electricity meters and the fuse board.
Make sure you clear any post as well. I always worry if a pile of post and free newspapers build up it may create a potential fire risk.
Falling through the trap
Q. I am a private landlord based in Edinburgh and have a small portfolio of flats. I set up a private limited company which owns the flats and I am sole director (the company is registered in Scotland). The rent is my only source of income. I have tenants who are asking to take holiday pay on rent.
What grants could a limited company be entitled to and as a sole director and sole employee is there anything that I could personally claim? My lending is not a mortgage but a business loan which holds securities over my properties.
Phil says: I am sorry to say you appear to have fallen into the trap that has caught out lots of landlords.
If you don’t have commercial premises that the business operates from, then you won’t qualify for the Small Business Grant of £10,000. Furthermore, in terms of lending, you seem to be in a similar situation to us. The borrowing we have on our own portfolio is commercial lending, so therefore, is not entitled to the mortgage holiday.
To go for a hat-trick of bad luck, being a director, if you don’t take a salary and instead pay yourself dividends dependent on profit, you are not entitled to furlough. It is hoped this may change and there is a growing campaign because most directors fall into this category. It seems unlikely but representations are being made to the Government.
I assume you have an accountant; it may be worth double-checking with them in case there is anything different in Scotland.
Like you, we have a number of tenants asking for assistance. The mortgage holiday announced by the Government has been widely misinterpreted by tenants who seem to think it applies to rent and that all landlords are getting it so it must available to them too. I think ‘mortgage holiday’ was a confusing term; perhaps ‘mortgage postponement’ would have been more suitable.
Throwing good money after bad
Q. I have a two-bedroom flat in central London with no mortgage on it. In September last year I let the flat to a short-term letting agency using a 2-year ‘common law’ tenancy agreement.
The flat is now sitting empty and I have had no rent paid since February. The director of the company tells me that if they paid rent during this lockdown to all of their landlords they would immediately be bankrupt.
The government’s initiative to prevent evictions during this time shouldn’t apply to me as my tenant is an agency and there is nobody living in the flat. How and when do I go about regaining possession?
Phil says: I have come across companies that operate in this sector. They are basically serviced accommodation providers operating the ‘rent to rent’ model. There are a number of firms who operate in this manner, simply because they don’t have the resources to invest in property themselves.
Many claim they let to corporate clients but in reality, some let properties through Airbnb. Others claim to offer guaranteed rent, which is great when they have a full lettings book, but when there’s a downturn they don’t have the resources to pay their liabilities.
I would suggest you research the company through a financial checking service such as Endole or DueDil. I would recommend anyone entering into any commercial deals do this as part of their due diligence.
There are further implications with dealing with companies like this. For example, if your apartment is leasehold, which most apartments are, many do not allow short-term lets. Similarly, if you have a mortgage on the property you may have breached the lenders’ terms.
My suggestion would be to end this agreement. Use a solicitor to make sure it is done properly. Then go to a reputable local letting agent who will source a quality tenant for your property. You can then decide whether you pursue this company for the rent owed. However, when you have checked their financials, I think you may decide not to throw good money after bad and walk away.
Expensive red tape
Q. Where I own rental properties, the council makes landlords take out a licence. Why doesn’t the government force local councils to abolish the Selective Licensing schemes and eliminate unnecessary costs for landlords? What happens if I don’t get my licence now as I can’t afford it?
Phil says: Councils love regulation and anything else that gives them control. And because many councils are now profit-motivated, some (not all) have decided to push hard to introduce Selective Licensing – a scheme which gives local authorities the power to introduce licensing for all rented properties in a given area.
Your only option is to speak to the council and ask them about licence applications and payment methods; it may be the case they allow payments by installments. I would certainly not ignore the situation because that is likely to prompt the council to take enforcement action against you.
The Airbnb effect
Q. What effect do you think that empty Airbnb properties will have on the market? I’ve seen a lot of them coming on as both short and long term rentals.
Isabelle says: The demand for Airbnbs has dried up, with many owners of these holiday lets putting them on the long term rental market. This will have an effect of lowering new rents, as supply increases and demand stays constant (or falls, as currently people are prevented from viewing properties or moving in due to social distancing guidelines).
This effect will particularly hit cities and areas that had a high concentration of Airbnbs, notably tourist hotspots such as seaside resorts, Edinburgh and central London.
Coronavirus got in the way of dealing with a tricky tenant
Q. Apart from empty properties I can’t let, one of the most frustrating effects I have had so far is the total stop on evictions, even where nothing to do with Coronavirus.
I have a tenant who is six months in arrears. I had been to court at the beginning of February and was awarded possession (the tenant didn’t turn up and hasn’t spoken to my agent for months).
When he didn’t leave in 14 days as the court advised I booked bailiffs, the earliest appointment being 18 March. They turned up to find a notice saying he was self isolating, which he had not communicated to me or other tenants in the shared house. (The notice went by end of day and he has been seen out and about by other tenants.)
The bailiffs took a photo and said they would return in 14 days. However, due to lockdown and eviction rules they have not done so and the tenant (still not communicating) continues to sit there for who knows how long, racking up more arrears that I am unlikely to ever recover. What can I do?
Phil says: I agree with everything you are saying – I feel exactly the same, as do many other landlords I am speaking to.
Many landlords are struggling with the tax implications of Section 24, where many will earn nothing from their income yet will still be paying tax.
Now they face a huge delay in getting bad tenants evicted, which could lead to some landlords exiting the industry. A recent report in The Telegraph said up to 80,000 landlords might be affected.
With your possession proceeding you are actually in a better position than most. Your bailiff appointment is obviously suspended but it should be acted upon when they re-start.
I think someone starting the process now will be lucky to get vacant possession before year-end.
Think about the future
Q. Our tenants say they cannot pay the rent this month. The rent is £1300 per month but as a household they were earning circa £100k per annum. Their tenancy ends June 1 should we just say that we would like them to leave, give them a rent arrears programme or something else?
Isabelle says: If your tenants have been furloughed or lost their jobs and so have to claim Universal Credit, it’s likely they will have experienced a severe cut to their income in the last month.
Your first move should be to talk with your tenants and work out a way they can pay you, whether that’s a rent arrears programme or a cut to this month’s rent. Think hard about if you want to end their tenancy, as there’s no guarantee that you could find replacement tenants quickly, particularly if social distancing guidelines are still in place.
Trapped by lockdown
Q. My tenants gave me notice that they were terminating their lease on April 6. I had already made the decision that I would sell after these tenants moved out and so was able to move quickly to market the property and accepted an offer at the end of Feb.
While the pandemic caused the buyer to reduce their offer by 5pc, we were still able to exchange with a completion date set for May 15. A Covid-19 clause was included to delay completion in the event either buyer or tenant was sick.
I’m now in the unfortunate position where my tenants are unable to move into their new rental because of the lockdown and the new property being occupied. I don’t want my sale to be cancelled because my tenants can’t move out, but I also don’t want to evict my tenants if they’ve got nowhere to go. What are my obligations to my tenants?
Phil says: Unfortunately, you are in a really awkward position. Having the Covid-19 clause should help, but as I have not seen the exact wording, it’s hard to say.
If your sale is part of a chain, this issue will apply through all parties. The simplest way to resolve this would be to get the solicitors involved and agree on a way forward.
I would be asking your solicitor to liaise with your purchaser’s solicitor to perhaps agree a stall until lockdown is lifted, and then agree a new date.
Q. I was buying a buy-to-let property that was due for completion in March before the Capital Gains Tax changes. Then, because of lockdown, the solicitors and property chain ground to a halt. Completion won’t happen until after April, and now I have to pay CGT on the house sale. Can this be avoided given the circumstances? I have evidence to help my case, so should I contact HMRC?
Phil says: I am sorry to hear of your predicament. I haven’t heard of any extensions being granted or the relaxing of timelines, and I would doubt there will be any unfortunately.
You can of course contact HMRC, which may prove to be easier said than done in the current climate. Manpower is down and they are facing a huge increase in calls with queries about all aspects of tax.
I would advise contacting a tax specialist. There are a number who specialise in Stamp Duty and Capital Gains Tax. Also, if you have an accountant, they will no doubt be able to recommend someone. If not, contact me directly and I will recommend one to you.
Being a good landlord
Q. I have one property that I rent to great tenants. I want to support them, so I agreed to a reduction in rent for two months. They have now asked for a rolling contract. This leaves me wide open to risk if they choose to move or leave during this crisis.
I have refused but only to protect myself. I have asked for a mortgage holiday but this of course will be for three months only. I will pass this on to the tenants. But the reality is these tenants have both had their jobs/income directly impacted by this crisis and will still be in this position for many months if not over a year. I don’t want them to be kicked out of the property but may have to if they cannot pay rent.
How can I be a good landlord and support them without impacting myself financially?
Phil says: In offering to reduce rent for two months, you have already helped your tenants. Have you discussed their financial position with them? Are they are furloughed on 80 per cent pay or have they lost their jobs and are planning to claim benefits?
The mortgage holiday is only a deferment, which will be added to the end of your mortgage. So in reality, the three months you are saving now could well cost you double if you have significant time left on your mortgage. For that reason, I would be wary of passing on the saving to your tenants.
If your tenant was to move, that would bring incur significant cost to them. To be honest, I think you are likely to see them stay but I would certainly be advising them to claim Universal Credit if their jobs have been affected. It would also be worth checking the benefits of Local Housing Allowance and see if your tenant is likely to be able to claim if they do go down the benefit route.
Wanted: one removals service
Q. Just as we went into lockdown, we had tenants lined up to move in. Our agent said everything could be done online, agreement, inventory etc.
But then our tenant couldn’t get a removals service, so the house remains empty until lockdown is lifted.
I’m still paying council tax, standing charges on utilities, mortgage etc. Other than a mortgage break, is there any other help out there during this time?
Phil says: We are in the same position. We had a let agreed on one property and a sale agreed on another.
The sale has been able to complete as the property was vacant. The rental could have happened but the tenant, similar to yours, couldn’t find a removal company who was still operating throughout lockdown.
As I write this, more and more businesses seem to be returning to work so if your property is vacant, perhaps the tenant might now be in a position to move.
If this isn’t the case, you could request a mortgage break. Sadly, there is no assistance available with Council Tax, utilities and insurance that I am aware of.
Exploiting the situation
Q. My tenant decided to stop paying rent from day one of lockdown, even though she was furloughed so was receiving money, and she already had the month before in salary. Can I force her to pay?
Phil says: It seems your tenant is trying to exploit the current situation.
You can attempt to make her pay via the courts, which of late has become a slow process, but has now become even more troublesome with all court proceedings suspended for 90 days.
If negotiation isn’t going to work, which from what you say appears to be the case, I would instruct a solicitor to write to her and advise action will be taken which will potentially lead to her being evicted and having her credit file adversely affected. This means she will find it extremely difficult to rent another property or obtain credit.
Alternatively, tell her if she wishes to avoid this action you are open to discuss part-payment for the furlough period and the arrears being paid over an extended timeframe.
Any Section 8 or Section 21 notices you wish to serve now require three months’ notice, by which time the courts should have re-opened (however, I imagine the backlog will be huge).
If you start action now, it’s realistically going to be the end of the year before you can obtain a vacant possession.
Getting tenants onside
Q. I have a buyer for a flat with the price agreed and preliminaries going ahead with lawyers, but no exchange of contracts as yet. There are tenants in an assured shorthold tenancy renting the flat and I can serve notice to vacate on May 31, meaning they must leave on July 31.
However, with the government protecting tenants is there any way I can guarantee to my buyer that the tenants will leave on that date so I can be sure of vacant possession? I thought that if the tenants refuse to leave, I could offer to pay three months rent upfront for a similar flat in the same area.
Phil says: I think your starting point needs to be the tenant. If they aren’t co-operating you aren’t going to be able to get them out probably until the end of the year, given the restrictions on giving notice and the delays in court.
You really need to have your tenant onboard for this transaction in the current climate.
Your offer of three months rent-free should sweeten the deal for them, assuming they can find a similar property in the area.
When is a landlord a business?
Q. I am a landlord with around 50 property lets across residential and commercial. The commercial is predominantly high street shops and the average rental income I receive per annum on these shops is around £7k each. The majority of shops have stopped paying their rent despite them all receiving the small business grant money of £10k. They say the money is for them to live off personally and not to pay their rent.
I have a business loan so am unable to take a mortgage holiday and my bank has said they can reschedule my loan but there will be penalties and fees to incur. The guidance from the government is very unhelpful in this respect. What would you advise I do to persuade them to pay something to enable me to pay my bank loan? I do feel that the government and the media seem to think that all landlords are rich and are able to just allow everyone a rent holiday.
Isabelle says: I’m afraid you, like many landlords, have slipped through the net of government support. You can ease the pressure by deferring the payment for their self-assessment tax return. Any tax due in July can be deferred until January 2021.
As you have a big portfolio, there is also hope that you could be eligible for the government measures for self-employed people. Whether a landlord would qualify depends on the level of involvement they have with their properties, says Cat Westerling, of estate agency Hamptons.
She adds: “In addition to fully managing all letting, maintenance and compliance matters, a self-employed landlord would likely need to be operating multiple properties, perhaps actively looking to acquire more and generating enough income from this for it to be considered a business or trade.” If this is the case, you may be eligible for a grant.
Otherwise I would communicate with your tenants, as well as the bank, to try to come to an arrangement.
Trapped by tax code
Q. I lost a buyer for my buy-to-let property just before exchange nearly three weeks ago, saying it was due to concerns about the security of their jobs because of the pandemic. I now can’t sell it or rent it out again due to the lockdown.
I will also lose £80,000 of joint owned lettings relief and nine months principal residence relief as both are being removed after 5 April as the last tranche of HMRC /Gov Section 24 Rules.
If I do sell when it all returns to normal, then I will be liable to pay the additional CGT (and without those other deducted reliefs) within 30 days, rather than have almost a whole tax year to pay if sold before 6 April. Is there any way I can defer? This would bring it into line with all the other tax deferral schemes for Businesses and Companies and for Self Assessments.
Phil says: I agree, I think the Government should allow a deferral. It is currently facing a catalogue of issues, so much of the tinkering in regulation has focused on the areas where large numbers are affected.
However, a number of property transactions will be affected in the same way as yours.
I would take advice from either an accountant or tax advisor. You may be lucky in that there is something still to be announced.
I want to help, but will I get paid back?
Q. My tenant has just told me she can’t pay rent this month as she’s been made redundant, but will pay me from May when Universal Credit kicks in – although this will be approx 20pc less than her normal rent.
I wasn’t expecting a month of no rent, but she’s a good tenant and I want to help. How do I make it clear though, without sounding heartless, that I expect the missed month and rent difference to be paid back in due course. Or am I supposed to simply waive these costs?
Isabelle says: It sounds like you and your tenant have a healthy, communicative relationship.
Perhaps you could suggest that the missing month’s rent can be paid back once she has found employment again. Or you could ask for it in lieu with some kind of interior building/maintenance work which needs doing anyway, and that could be undertaken safely.
Means of communication
Q. My assured shorthold tenant has been a late payer throughout his tenancy and ceased paying rent completely on March 1.
I have served a three-month notice to quit on him, to expire on June 30. As I am classified as a vulnerable person (I’m on dialysis), I’m self-isolating, so I can’t do anything at the moment. The notice was served by post at the end March. Is it still valid?
Phil says: The courts recognise first class post as an acceptable form of service, although it would be ideal if you obtained a proof of postage.
I would follow up with a text message or a Whatsapp message (this is preferable because the blue ticks shows it has been received and read). State in the message that ‘as you have now received your three month notice, which expires on June 30, can you please advise the date you will be moving out?’
In asking a question, if they reply they are confirming the notice was received. For future reference, notices really need to be served by hand or even better via a process server, but obviously there is a cost to this.
If your tenant wants to be really difficult and you end up going to court, they will more than likely claim not to have received your notice, so being able to back up with occasional messages (no more than one per month) will help you in this situation. The judge will then take a view on whether he believes them or not.