Year: 2020

With almost 8.5 million people renting and spending on average over 40% of their income on housing costs, it is unsurprising that more landlords are facing rent arrears – a problem expected to worsen over the coming weeks.

With the news out this morning that rents have hit record highs, newly released data from rental payment automation platform, PayProp, backs up concerns that there is trouble on the horizon as four in five agencies report seeing the share of tenants in arrears grow since March.

Landlords will need the support of letting agencies to ensure they have a comprehensive record of all arrears and communications with tenants, according to PayProp.

Increased arrears could remain a problem for months

Although UK lockdown measures have started to ease in recent weeks, several reports suggest that some tenants will continue to struggle meeting their rental payment obligations due to the knock-on effects of Covid-19.

The Resolution Foundation’s analysis of a YouGov survey of 6,000 adults suggests that approximately one in eight private renters has fallen behind with housing costs since the start of the Covid-19 crisis.

The report goes on to spell out the impact on the lettings industry. Following a big jump in April, the percentage of tenants in arrears has climbed to over 15%. The average amount owed by tenants in arrears has also grown in relation to their monthly rent, although around a third of agencies actually saw arrears reduce as tenants began repaying the amount owed by them.

Neil Cobbold, Chief Sales Officer at PayProp, comments: “After an initial surge in March when Covid-19 started to spread rapidly across the UK, heightened levels of rent arrears could persist for many months to come, despite many tenants settling some of their debt.

“Measures like the furlough scheme and Universal Credit increases have helped tenants to continue paying their rent, but payments are still less predictable than usual, and the furlough scheme is almost at an end.”

“It’s therefore hugely important that letting agencies are on hand to help their landlords deal with rent arrears and associated issues.”

Keeping digital records is a top priority

Digital record-keeping provided by letting agencies can help landlords to stay on top of rent arrears, allowing them to see how much is owed and by which tenants.

Agencies can also help landlords to create payment plans for tenants to pay back arrears over a manageable period of time. Recording those plans clearly is crucial as landlords will need to see whether or not tenants are repaying on schedule once normal life resumes.

Cobbold explains: “Many landlords have been very flexible in agreeing on temporary payment schedules with tenants in recent months. If all the information is recorded digitally by letting agents, this can help all parties to have a clearer understanding of their financial positions – and increase landlords’ chances of recouping unpaid rent.

“Keeping a record of all conversations and agreements made with tenants will also reduce the chances of payment disputes occurring later on.”

Guidance will be key as eviction pause continues

With the evictions process put on hold for a further two months, landlords will need to consider their options carefully.

The moratorium will now continue until August 23, five months after it first began – and there is no guarantee that the government will not extend it further as the end date approaches.

It has been predicted that there could be a surge in court cases after the eviction freeze ends as many court possession orders were stopped in their tracks in March. New cases may have to wait until this backlog is cleared.

Cobbold concludes: “It’s important that tenants who are having financial problems are advised to seek support so they can pay as much rent as possible. Letting agents should be familiar with the types of support on offer, such as Universal Credit and the Self-Employment Income Support Scheme so that they can communicate them to landlords.

“Agencies should continue to advise landlords to pursue the lengthy and expensive court process only after trying to agree on repayment schedules with tenants struggling to pay rent.

“While eviction will always be the last resort, letting agents’ records of payments and agreements will also provide landlords with the evidence they need should they need to seek repossession.”

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At least 10.5 million Brits have packed-up and moved back in with their parents due to the ongoing coronavirus crisis, according to newly released figures.

New research by personal finance comparison website, finder.com, found that of those who have moved home again, over two-thirds expect the move to be more permanent and have no move out date in sight.

The financial implications of the pandemic are far from over as 2 million plan to move back in with their parents soon. This is likely to be due to fears over losing their jobs once the Coronavirus Virus Job Retention scheme is phased out in the coming months.

When it comes to generations, nearly 3 times more of generation Z have moved back in with their parents than millennials (58% vs 20%).

Around 1.9 million of those who have moved out (18%) have continued to pay rent for accommodation they have not been using.

With the average cost of rent being £886 per month and lockdown spanning 3 months, this could have cost young renters £2,658 so far. Overall, this equivalent to a total of £4.9 billion being wasted on rent for accommodation that tenants aren’t using.

However, not all renters who have now moved back in with their parents have carried on paying rent. The second most popular option for people who have moved home was to not renew their tenancy (13%) and a further 12% have managed to cancel their tenancy altogether. Through negotiations with their landlord, 10% have managed to reduce their rent and 7% have opted to take a rent holiday.

Matthew Boyle, mortgage specialist at finder.com, comments: “It’s unsurprising that the COVID-19 pandemic has caused younger generations to move back in with parents but most have continued to pay rent for unused flats, which will no doubt be very frustrating.

“The government has asked for landlords to be understanding towards tenants during these times, so If you fall into this category then try negotiating a reduced rate. For those who don’t intend to return anytime soon, you could also look at subletting your room or perhaps even ending your tenancy. Even if these options aren’t possible, you could compare energy providers and insurance policies to see if any savings could be made – it all adds up.

“On the bright side, you may have saved more than you think by staying at home. Our recent research found that during lockdown Brits have saved £99 per week by not going to work and socialising, now totalling £1,188 after 12 weeks of lockdown.”

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Self assessment tax-paying buy-to-let landlords who have been hit hard by the Coronavirus, are being allowed to defer their July tax payment on account.

There are many self-assessment tax-paying landlords who may not be aware of the HM Revenue and Customs latest updated guidance uploaded onto to its website, which is now allowing people to pay their tax due in July deferred until January 31st 2021.

The latest guidelines state that the extension of the payment date is only optional so anyone who can afford to pay their second self-assessment by the end of July, should do so.

Many people will need to take advantage of the extension date and will be safe in the knowledge that they will not incur any penalties or interest for late payment.

Katharine Arthur, partner of a Chartered Accountants firm, said: “HMRC have quietly adjusted the guidance but this is big news for individuals who don’t have the funds set aside for their July tax payment.

“The deferment will now assist all self-assessment taxpayers, not just the self-employed, who are suffering hardship as a result of the Coronavirus including those with rental and investment income.”

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The Government has confirmed how new electrical safety regulations for landlords should be interpreted.

The NRLA sought clarification from the government on this matter, following an update to the landlord guidance last week which caused some confusion on compliance with the regulations and implementation dates.

Previous guidance on the regulations, published at the start of June, stated that they apply to new tenancies from 1 July 2020. However, the updated guidance (published on 19th June) stated they apply from 1 July 2020 for tenancies that began on or after 1 June 2020.

While this change has been revoked, we understand that this is the interpretation the government is using.

What does this mean for landlords?

Today, MHCLG has confirmed to us:

• The regulations apply to tenancies granted from 1 June 2020.
• The requirement to provide an EICR or similar applies from 1 July 2020.
• This means that any tenancies granted from 1 June 2020 will be required to have an EICR or similar from 1 July 2020 ie as the regulations are drafted, there is a grace period of one month for tenancies granted from 1 June 2020.

The regulations will continue to be rolled out to all existing tenancies in England from April 2021.

Contractual and statutory periodic tenancies

Members are advised to check the type of tenancy listed in the ASTs given the need for an EICR or similar at the start of a new tenancy.

Some landlords have tenancies that come to an end of the fixed term after 1st June 2020. At the end of the fixed term the tenancy rolls on, and depending on the wording of the original AST, this may be considered a new tenancy.

Recent NLA/RLA AST templates allowed for contractual periodic tenancies, meaning that the tenancy continuation is not treated as a brand new tenancy.

Tenancy agreements that DO NOT have any clause in them specifying how the tenancy will continue after the end of the fixed term are ‘statutory periodic’ tenancies. For such tenancies, Section 5 of the Housing Act 1988 steps in to create a brand new tenancy agreement known as a statutory periodic tenancy which is separate from the original fixed term.

What should landlords do?

Landlords in England with tenancies granted from 1st June 2020 should write a letter to their tenants to ask for permission to enter the property, in order to undertake the electrical installation inspection.

The letter should be clear that tenants can refuse access if they don’t want to allow external people into their homes due to coronavirus. If this is the case, the tenant should make this clear in their response and should let the landlord know when they feel comfortable to allow access to the property.

If landlords have made reasonable attempts to organise the inspection, they will have a statutory excuse. It’s therefore important that landlords keep records of their correspondence with their tenants as evidence that they have attempted to organise the inspection, but the tenant has refused access.

What if a tenant doesn’t respond?

If the tenant doesn’t respond, then landlords should follow the usual standard for seeking access by making three genuine attempts to arrange a suitable time. Again, it’s important to keep records of your attempts.

The NRLA has called for the government to be clear in their guidance for local authorities, that they should take a pragmatic view to enforcement given both the confusion caused by the late amendment and the current coronavirus situation.

Blog Post from NRLA

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An international property agents claims that because of the pandemic house buying confidence has been hit hard, which will almost certainly mean that in the short term property prices will fall between 5% and 10%.

However according to the firm’s May UK Housing Market Update the fall will be substantially less than the catastrophic drop in house prices during the Global Financial Crisis of the early 1990s.

The signs of a wider economy recovery which will dictate how long it will take for housing prices to bounce back are not optimistic.

Oxford Economics’ May forecast predicts that the UK’s Gross Domestic Product by the end of 2024 will be 0.7% lower than it thought in April, and the Update says “This will have a knock-on effect on household incomes.”

However one positive is that interest rates should lower for a longer period says the Update’s authors: “Our November forecast for 15 per cent UK house price growth over the five years to 2024 included an assumption that the Bank of England base rate would rise to 2 per cent by the end of that period. Oxford Economics’ current forecast is for it to be 1 per cent.

“The trade-off between borrowing costs and income rises will determine the medium term outlook for house prices, once the initial crisis has passed.”

The market is starting up again and short term activity will be fuelled by potential buyers left frustrated by the lockdown restrictions will be further inclined to move. Interestingly enough the pandemic has caused many buyers to now look at properties in the countryside and those with more space.

One other point is that there is a greater chance the new homes’ market will recover faster, as it will be far easier to have socially distanced viewings and virtual viewings will give a truer picture of a property.

“While this bodes well for an increase in activity, it is starting from the exceptionally low levels observed during lockdown. Data from the main property search portals suggests that sales agreed and new listings were at around 10 to 20 per cent of the levels seen immediately before the lockdown, although buyer browsing levels have been higher.”

There was little activity in new mortgage approvals in March which was its lowest level since Q1 2013, the drop was further accentuated by February’s extreme activity which was the highest since 2014.

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MPs on parliament’s Housing, Communities and Local Government are considering giving private tenants more financial assistance during the Coronavirus outbreak.

The committee is calling for the Local Housing Allowance to be increased so it will properly ‘mirror’ real market rents which landlords have long been asking for.

A trade body has recently carried out research which found that the large majority of landlords who have had tenants asking them for help because of the pandemic, are supporting them.

A spokesperson for the trade body, said: “We want to see that [housing benefits] continue to ensure tenancies can be sustained. We have long called for benefits to cover rents which would be by far best option for tenants and landlords alike.”

The spokesperson also commented on the Committee’s recommendations regarding property repossessions: “We support the government’s efforts to ensure that landlords and tenants seek first to reach a mutually agreeable solution where rent arrears have built up as a result of Coronavirus. These ‘pre-action protocols’ balance the needs of landlords and tenants and contain genuine, compelling sanctions to ensure good practice.

“We will continue to work with the government to ensure that its plans are meaningful and workable for both tenants and landlords.”

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One of the UK’s largest letting agencies claims that since the start of the Coronavirus pandemic tenants in rental arrears increased from 2% to 5%, and believes that the rise reflects the wider market.

The agency is very relieved that the increase is considerably lower than its initial expectations in the first eight weeks of Covid-19.

The CEO Dorian Gonsalves has said he is confident that the company’s figures are a true reflection because its branches, are spread across the UK, and cover a wide range of the many different housing markets along with all levels of tenant income.

Gonsalves said: “There are a whole bunch of reasons why our rent arrears level is relatively low.” He explains it is relatively low because the agency takes a stringent approach to referencing, and its property management operation continued throughout the lockdown, keeping in constant contact with their landlords and tenants if any issues arose.

He also believes that as the chain is far stronger outside of the capital as on average its tenants are paying £800 per month whereas in London it is around £1,500 per month.

He added: “For example, if you’re earning £1,600 a month from the furlough scheme then in the provinces paying £800 a month isn’t a stretch and that’s why I think our arrears rate has stayed low.”

Gonsalves has recently spoken to the company’s rent guarantee insurance provider who told him that they are seeing a similar rise in rental defaulting in its own business.

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Labour has thrown its weight behind campaigning pressure groups in a general call to avoid what the party’s housing spokeswoman calls “an eviction crisis in the autumn”.

However, the party has declined to say whether evictions in the pipeline before the outbreak of Coronavirus should be heard once the ban is lifted.

Shadow housing minister Thangam Debbonaire has told MPs her party now stands with pressure groups on the issue – although she does not say specifically how evictions may be avoided.

She said in the Commons: “Local Housing Allowance doesn’t even cover average rents, anyone with no recourse to average funds doesn’t even get Universal Credit, and over a million people are struggling with rent.

“But this is fixable. So will the government heed, today, the calls of Shelter, Citizens Advice, Generation Rent, numerous charities and building societies – and the Labour Party – act now, and prevent people from losing their homes in an eviction crisis in the autumn.”

In social media posts supporting Debbonaire and including her Commons statements, Generation Rent says: “We need a permanent end to unfair evictions and a plan to tackle rent debt before it’s too late.”

In a later tweet by Debbonaire herself, she clarified Labour’s policy by saying she wanted: “Exactly as Generation Rent, Shelter, etc – increase in Universal Credit and Local Housing Allowance, suspend Section 8 and Section 21 evictions.

Then another Twitter user asked Debbonaire whether she and Labour believe that an apparent 20,000 pre-Covid eviction notices are already in the system – 15,000 involving social landlords and 5,000 involving the private sector.

Debbonaire declined to answer the question.

Yesterday morning Letting Agent Today asked the Labour Party for a definitive position on its policy; to date, there has been no reply.

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It’s been revealed that a legal group is considering how courts will consider eviction cases when the current ban is lifted in late August.

Sir Terence Atherton – Master of the Rolls and Chair of the independent civil justice council and Head of Civil Justice – has written about the new body in a Civil Justice Council report which considers the range of legal processes and how they should be handled during the Coronavirus crisis.

His statement was: “In particular responding to concerns expressed by a number of consultees about the consequences of the current stay on housing possession claims ending. I have established a cross-sector working group, which is being chaired by Mr Justice Knowles, the chair of the Civil Justice Council’s Access to Justice Sub Committee, to help address these concerns.”

ARLA Propertymark, which has assessed the full Civil Justice Council report, says its main conclusion in regard to the resumption of eviction cases from late August onwards is that remote hearings specifically for case management discussions would be suitable in cases where both sides are represented.

However possession hearings were felt to raise numerous difficulties and were unsuitable for remote determination.

Suggestions made by respondents to the Civil Justice Council review to enable possession hearings to resume included:

– Stronger Pre-Action Protocols for private rented sector evictions based on those used by social landlords in possession cases. “This would require landlords and lenders to demonstrate that they have taken proactive steps to secure legal advice for tenants and generalist advice (this would need to be funded by the Ministry of Housing, Communities and Local Government) to assist with the resolution of any underlying issues with accessing welfare benefits” explains ARLA;

– An expansion in the availability of legal advice to all parties; and

– Temporary relaxation of Housing Act 1988 Ground 8, to reflect the circumstances created by the pandemic and protect public health.

No timescale has been given for the new working party to report, although the evictions ban is currently scheduled to end on August 23.

Blog Post from Letting Agent Today

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The Local Government Association has refuted claims by the National Residential Landlords Association that the evictions ban extension exposes victims of domestic violence to greater risk during the pandemic eviction ban.

The Local Government Association (LGA) has rejected claims by the National Residential Landlords Association (NRLA) that the evictions ban exposes victims of domestic violence and anti-social behaviour to more risk.

Since the NRLA story broke this morning, the LGA has issued a statement insisting that its members back the ban because police powers can still be used to evict perpetrators of domestic violence despite the evictions ban.

The NRLA claimed that landlords were ‘powerless to take action against tenants committing domestic abuse or making the lives of fellow tenants or neighbours a misery’ during the ban.

Ben Beadle, Chief executive of the NRLA, said earlier today that extending the evictions ban is not without victims and that it “leaves landlords powerless to tackle the kind of behaviour that causes untold suffering and hardship for many communities and tenants alike,” he said.

But Councillor David Renard, the LGA’s housing spokesperson, says he is pleased that the government is banning evictions until the end of August because it will “help to mitigate against the rising homelessness pressures that councils are under as a result of the pandemic”, he said.

“For victims of domestic abuse, other options including police powers, enable perpetrators to be removed from the home while the victims remains living there.”

A Domestic Abuse Bill is currently going through parliament which seeks to create a statutory definition of domestic abuse and establish a Domestic Abuse Commissioner.

The will stand up for victims and survivors, raise public awareness, monitor the response of local authorities, the justice system and other statutory agencies and hold them to account in tackling domestic abuse.

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