COVID-19: support for landlords and renters
13 October 2020
In the framework of new wave of COVID-19 the UK business faced an economic emergency. Therefore, the UK Government has announced the new measures to help businesses.
New amendments apply for England and Wales. They cover both residential and commercial lettings. For residential tenancies landlords are not able to start possession proceedings unless they have given their tenants six months’ notice.
The last changes to measures for commercial landlords and renters extend the period of measure until 31 December 2020, being the measure intended to help economic system in the wake of the COVID-19 outbreak.
Residential tenancies
New residential tenancies measure protects individual renters in the UK. The key provision is that from 29 August 2020, with the exception of the most serious cases, landlords are not able to start possession proceedings unless they have given their tenants six months’ notice. This means the landlord will not be able to start the court process until the end of this period.
Where does the measure apply?
This measure applies to most tenants in the private and social rented sectors in England and Wales.
When does a measure take effect?
The measure came into force on Friday 27 March 2020.
Are the provisions retrospective?
The measure is not retrospective.
What is the exception for six months’ notice?
For notices in relation to anti-social behaviour, domestic abuse, rioting and false statement, the required notice periods have returned to their pre-Coronavirus Act 2020 lengths. In some cases, this means that proceedings for anti-social behaviour can be brought immediately after notice has been served. Notice periods on these grounds otherwise vary, depending on the type of tenancy and ground used, between two weeks and one month. Where at least six months of rent is unpaid, a minimum four-week notice period will be required. If less than six months of rent is unpaid, then the notice period is six months. Where a tenant has passed away or is in breach of immigration rules and does not have a right to rent a property in the United Kingdom then a minimum three-month notice period is usually required. Where a social tenant has an introductory or demoted tenancy (used by local authorities), for cases concerning anti-social behaviour (including rioting) and domestic abuse, a four-week notice period will be required. Otherwise, notice periods for Introductory and Demoted Tenancies will be six months. A six-month notice period is required for all other grounds, and where accrued rent arrears are less than the value of six months’ rent.
What to do in case of accruing rent arrears?
There are no exceptions for tenants in case of accruing rent arrears. Tenants should continue to pay rent and abide by all other terms of their tenancy agreement to the best of their ability. The government has a strong package of financial support available to tenants, and where they can pay the rent as normal, they should do. Therefore, in case of financial hardship in the first instance the tenants should speak to their landlord if they think they will have difficulty meeting a rental payment. Rent levels agreed in your tenancy agreement remain legally due and you should discuss with your landlord if you are in difficulty.
What can I do about rent arrears?
Tenants should continue to pay rent and abide by all other terms of their tenancy agreement to the best of their ability. An early conversation between landlord and tenant can help both parties to agree a plan if tenants are struggling to pay their rent. This can include reaching a temporary agreement not to seek possession action for a period of time and instead accept a lower level of rent, or agree a plan to pay off arrears at a later date. Where appropriate, if disputes over rent or other matters persist, landlords and tenants are encouraged to consider mediation. If tenants fall into financial difficulties due to a change in their employment or earnings, for example, they may qualify for Universal Credit.
Should the landlords repair the premises?
Urgent, essential health and safety repairs should still be made. Thus, landlords remain legally obligated to ensure properties meet the required standard. Tenants have a right to a decent, warm and safe place to live. Where safe to do so, it is in the best interests of both tenants and landlords to ensure that properties are well maintained, kept in good repair and free from hazards. Landlords can now take steps to address wider issues of repairs and safety inspections, provided these are undertaken in line with public health advice.
I’m a shared owner. How does this affect me?
Most shared owners will pay both rent and a mortgage. Like other mortgage holders, shared owners who are struggling to meet their mortgage payments as a result of COVID-19 will be able to request a mortgage payment holiday from their lender. Most shared owners will also be covered by the Coronavirus Act 2020, meaning their landlords will not be able to start possession proceedings unless they have given shared owners the required notice.
Business tenancies
New business tenancies measure protects business renters in the UK. Thanks new measure commercial tenants are protected from eviction if they cannot pay their rent.
What is the essence of the support?
The main idea is that no right of re-entry or forfeiture for non-payment of rent may be enforced in any way during the specified period.
Where does the measure apply?
This measure applies to all commercial tenants in England, Northern Ireland and Wales.
What is time frame of this measure?
Firstly these provisions immediately prevented a landlord from terminating certain business tenancies by forfeiture for non-payment of rent until 30 June 2020. The moratorium on the forfeiture of business tenancies was further extended until 31 December 2020. The Secretary of State may specify to extend it if needed.
What tenancies do the restrictions apply to?
The Coronavirus Act states that the restrictions benefit any business tenancy to which Part 2 of the Landlord and Tenant Act 1954 (“the 1954 Act”) applies. The Explanatory Notes accompanying the Act confirm that the Government intended it to also apply to leases where the protection of the 1954 Act is excluded. The provisions also seek to cover lawful subtenants.
What is with existing litigation?
The tenant cannot be evicted for existing litigation based on forfeiture for rent arrears until end of other relevant period, if the Secretary of State may specify. Therefore, no business will be forced out of their premises if they miss a payment at least until 31 December 2020.
Who should provide/ pay for additional services?
The starting point is that landlords remain liable to provide, and tenants remain liable to pay for, services in accordance with the express service charge provisions in the lease.
What is with failure to pay?
Failure to pay the rent in the framework of such period is not to be recognized as persistent delay in paying rent.
Must Tenants "keep open" their Premises ?
Some modern commercial leases contain “operating/opening hours” clauses. Under the Health Protection Regulations 2020, a large number of premises closed to the public.Where a tenant is obliged to “keep open” the premises it is likely that the Regulations will provide a defence to the requirement to “keep open” especially if it can be established that by keeping the premises open will be unlawful. However, where the Regulations no longer apply to the tenants business, a tenant is once again likely to become obliged to “keep open” the premises.
Will insurance help?
Landlords and tenants should review their insurance policies to understand the cover available to them. Some policies include business interruption cover but this may only be in place where there is a damage to property or where government action has meant that it is illegal for premises to remain open. Landlords and tenants should note that invoking a force majeure or a frustration claim can impact insurance policies and, in any case where cover may be available, parties should ascertain and carefully comply with any notification requirements.
Company Voluntary Arrangements (CVAs)
There have recently been a number of high profile Company Voluntary Arrangements (CVAs), particularly in the retail sector, that have been used to reduce lease liabilities. COVID-19 has also contributed to a trend towards CVAs in other sectors too such as hospitality.
Summary
Landlord and tenant amendments are a temporary measure only. This approach will be terminated in a short period.
Residential tenancies measure helps individual renters to save their home. Business tenancies measure in fact is a rent deferment for commercial tenancies.
Due to the fact that the situation is changing rapidly, the provisions may be changed or updated in the near future.
Lef Measures due to COVID-19 support for landlords and renters
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For further information on any of the points above contact
Mikita Makayou at mikita@lexefiscal.com, or
Dr. Frank at clifford.frank@lexefiscal.com