The changing laws of the rental property sector

Constant changing laws have always been something landlords and tenants alike have had to keep on top of in the private lettings market but during a pandemic this is truer than ever. The last 12 months have seen a number of challenges for many people with less job security, complicated mortgage holiday processes and the unknown of Brexit to name a few. Lee Pearce, Partner at Ellisons Solicitors, looks at how landlord and tenant rights changed as a result of the pandemic.

The Covid-19 crisis brought with it many changes and uncertainties for the residential renting sector. Throughout the pandemic the government dished out huge amounts of money and guidance to prevent a housing crisis, which is resulting in ever-increasing levels of arrears and deferred rents. 

Tenant uncertainty

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Nearly a year on from the start of nationwide lockdowns, the sad reality is that if you are a landlord in March 2021 I would be surprised to hear if you didn’t have a tenant in some kind of arrears. As we creep closer with baited breath towards the date our lives can return to normal, there is still a huge amount of unknown for the property sector and tenants still feel less sure about their needs, making them more cautious to commit to extra space. As a result of this, we’re seeing more and more tenancy agreements being drawn up to include a Covid clause which covers unknown circumstances and includes rent freezes. 

From March 2020 three things were changed for when a tenant cannot pay their rent on a shorthold tenancy with arrears accruing. Most notably all evictions were cancelled, notice periods were extended and all claims that had already been issued at the start of the pandemic were stayed. However, it is important to note that there has been no alteration to the grounds on which a landlord can recover possession for rental arrears which means that where the tenant is in default by at least two months a section 8 notice can still be served, albeit that that notice will need to give the tenant six months’ notice, rather than the two months that landlords were required to give pre-pandemic.    If the matter goes to court, judges also have discretion to extend the possession order timescale to six weeks where the tenant can demonstrate extreme hardship 

If you find yourself in a difficult spot, as a tenant the best approach is to have complete transparency with the landlord to come to an agreement about an amount you can continue paying each month and an agreement on a repayment plan. 

Law changes for residential landlords 

As a result of the virus, the government enforced many restrictions on landlords and how they can lawfully deal with an unpaying tenant. Unfortunately for residential landlords, the new laws and regulations are more complicated than for commercial property owners.

Adding to this worry from a landlord perspective is that insurance policies in the real estate sector, even where they cover the virus, generally won’t pay out unless there is a loss clearly covered by the rent abatement clause, which requires physical damage to have been caused. 

For the foreseeable future, there will be considerable delays for landlords in the county court and a reduced court accountability so it is best to try and avoid this option. 

If you have a tenant in your property with months of arrears already, you need to issue a section 21 notice as soon as possible, which will also require you to give 6 months’ notice at the moment.. 

The most cost-effective way to deal with late paying tenants will be to speak to your tenant and obtain a full disclosure of their circumstances and why they can’t pay. Then you can better understand their situation and negotiate a payment plan and exit strategy. As bizarre as it sounds, it may well prove cheaper as a landlord to pay a sum of money for them to leave the property, especially now that the government has extended the legislation surrounding residential evictions until 31 May 2021, meaning that longer notice periods will still apply until then. 

Lee Pearce, Partner at Ellisons Solicitors

 

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