The detail of the legislation led to some commentators saying at the time that it didn’t deliver on the Prime Minister’s promise to protect renters. However, many industry experts have been clear in their support for the Government’s actions, albeit suggesting that the detail of the Bill isn’t worded in a way that it’s easy for both landlords and tenants to understand. As David Cox, Chief Executive of letting industry body ARLA Propertymark explained: “The way the Government went about introducing this new legislation is confusing, but unquestionably this is a ban on evictions.
- Rent increases at end of coronavirus crisis to put NHS staff at risk
“Technically an ‘eviction’ is the forceable removal of somebody from their home by either a County Court Bailiff or a High Court Sheriff.
“However, in order for a tenant to be evicted, the full court process needs to be undertaken, a judge must have issued a Possession Order, and a Warrant for Possession needs to have been obtained. Even before the court process starts, landlords have to give notice, generally between two weeks and two months, depending on why they’re trying to remove the tenants.”
David continued: “What the government did last month is extend the notice period required to three months, meaning that even if an eviction notice is served tomorrow, the landlord cannot start the court process for three months.
“The court process then takes an average of 22 weeks, before a bailiff arrives at their front door. You can’t get an eviction without a court process, and therefore this law stops a landlord from starting that court process for at least three months.”
The result is that any eviction processes started prior to the 26th March are now also on hold for at least 90 days. In practical terms for both tenants and landlords, starting the eviction process – either as a result of the impact of Covid-19 or for any other reason – realistically just isn’t logistically possible at the moment.
But where does all of this leave landlords if their tenants are unable able to pay their rent? It’s estimated that, of approximately five million private rented properties in the UK, potentially over two million are subject to an outstanding Buy to Let mortgage.
With recent research from housing charity Shelter suggesting that 1.7million private renters in England alone believe they could lose their jobs over the next three months, that equates to one in five private tenants who could potentially face financial difficulties.
In the worst-case scenario, if the landlord is unable to keep up with their mortgage payments due to non-payment by tenants, the property could be repossessed by the lender, leaving the tenant facing eviction.
It’s for this reason, many landlords take out a specific form of insurance that covers them in the event that their tenant doesn’t pay their rent, called a ‘landlord rent guarantee’ policy.
In the normal course of events, these sorts of policies have quite a straightforward claims process. The issue at the moment, however, is that many insurers offering these products require the landlord to start the eviction process by serving the appropriate notice to the tenant, before they will then pass the claim for payment.
Moving house: Can you move house during lockdown? [EXPLAINER]
How estate agents will offer ‘virtual viewings’ during coronavirus lockdown [EXPERT GUIDE]
Housing market on the brink: 500,000 fewer properties to be sold in 2020 as crisis deepens [ANALYSIS]
Even though the emergency legislation introduced last month states that eviction proceedings can’t legally start until after lockdown measure are lifted, some insurers have said in recent weeks that they won’t pay out on claims from landlords unless eviction proceedings are instigated, regardless of the new law.
Despite this, some insurers are still providing full cover for their landlord clients, as Oli Sherlock, Head of Insurance at Goodlord commented: “We welcomed the Government’s commitment to help tenants and landlords through the immediate crisis when it was announced. But this decision has wider reaching implications for products like rent protection and legal expenses cover.
“In the past few weeks, we have seen products from various insurers removed from the market due to the Covid-19 crisis, or indeed claims being refused for the same reason.”
Oli concluded: “As a result, we’ve made key changes to our rent protection and legal expenses policy to ensure that we can continue to offer this service to landlords on new lets, as well as continuing to renew existing policies, protecting landlords for as long as possible.”
But for those landlords who don’t have such a policy in place – or indeed have been told by their insurer that they are unable to make a claim – and for tenants who are unable to pay their rent, there is potentially another solution.
- Research shows that 62% of renters don’t understand the new rules
According to the alternative rental deposit service Canopy, £4.5billion of tenants’ deposit monies are currently tied up in traditional custodial deposit schemes. But by replacing their cash deposits with a deposit replacement insurance policy, Tahir Farooqui, Founder of Canopy suggested that tenants can ‘unlock’ the funds they have held in a custodial scheme to help contribute towards any shortfall in rent.
There are a few alternative deposit schemes available from several different providers, all of which differ slightly, but provide a relatively similar facility. The tenant takes out the policy, which usually costs the equivalent to one weeks’ rent, rather than putting down a custodial deposit equivalent to five weeks’ rent. This reduces the up-front costs of moving in.
The tenant remains liable for paying for any damages to the property or any unpaid rent at the end of the tenancy, but rather than deducting any amount owed from a custodial deposit following the necessary process, the landlord is able to claim on the policy in the first instance, then the company engages with the tenant to recover the money owed.
Tahir suggested that there are perhaps thousands of tenants who aren’t paying their rent at the moment and confirmed: “The new law doesn’t advocate arbitrary non-payment of rent as course of action. If tenants find themselves in financial difficulties, they must let their landlord or letting agent know as soon as possible, ideally before their rent becomes due and they miss a payment.”
Tahir continued: “It’s important that both parties reach an agreement with regards to any short-term rent reduction or rent holiday before a tenant reduces or withholds payment, and it’s crucial to ensure this is confirmed in writing.
“Otherwise, by doing nothing and not communicating with their landlord, tenants could find themselves with an adverse credit history as well as an outstanding debt for rent that’s still due, together with an eviction notice once the Covid-19 crisis is over.”
For tenants able to negotiate a temporary rent reduction or rental payment holiday, it’s also worth remembering that unless you specifically agree otherwise with your landlord, the amount you owe will have to be repaid at a later date, either as a lump sum or via increased rent payments.
Get any arrangement clearly documented in writing and keep somewhere safe for your records, so that both sides are fully aware of what payments are due and by when, to avoid further issues in the future.
If you’re a tenant in financial difficulties and need advice, visit the Shelter website www.shelter.org.uk or contact your local Citizen’s Advice Bureau www.citizensadvice.org.uk
Follow Louisa on Twitter: @louisafletcher
Source: Read Full Article