The ramifications of the COVID-19 pandemic continue to sweep through the economy.
Hard on the heels of the latest Government bailout on Tuesday and due to increasing political pressure, the Prime Minister announced that emergency legislation will be introduced to prevent landlords - both private and public - from evicting tenants who cannot pay their rent because of job losses or having to look after their children after school closures.
New eviction attempts will be banned for three months.
In addition, landlords who are paying a mortgage and are dependent on the income to pay the mortgage will be given a three month holiday. At the end of the three month holiday, the Government hopes that landlords and tenants will be work together to establish a repayment plan.
In practice, it’s difficult to see how this will work if tenants have no available funds - the landlord is therefore likely to be saddled with the loss.
We also don’t know what the full qualifying criteria to obtain the holiday will be and what evidence will be required. Those tenants working in the gig economy may not have anything such as a P60.
As soon as the draft legislation is available, we will update you. In the meantime, here are some answers to questions a lot of our landlord clients are asking:
Q: Does the eviction ban apply only where a landlord is seeking to evict a tenant who has accrued arrears since the pandemic began?
A: No, it is very likely a general ban which applies even where a landlord already has a possession order / bailiff appointment. The Ministry of Housing, Communities & Local Government press release of 18 March 2020 indicates that “no renters in private or social accommodation needs to be concerned about the threat of eviction” for at least three months. Where the message is so strong, it is difficult to imagine legislation which will distinguish between pre and post-COVID-19 arrears. This is consistent with the information received during our calls with various court clerks today, who informed us that the majority of courts have now cancelled all residential evictions for the next three months and that all new and re-arranged bailiff appointments will need to be on a date post-expiry of the ban. The wait to get a bailiff appointment in Central London is already three months so landlords should not expect to get properties back until at least September 2020.
Q: When does the ban apply from?
A: Probably immediately. We understand that most courts, including in Central London, have already cancelled their existing bailiff appointments and put the enforcement stage of possession claims on hold. However, no official court staff guidance has been released so the approach varies from court to court and some may still be sending bailiffs out. Landlords will need to contact the relevant court directly if they have queries about existing appointments.
Q: Does the ban apply to evictions only or does it also prevent landlords from issuing new residential possession claims?
A: This is not clear. The headline in the 18 March 2020 press release states that there should be no new possession proceedings started through the courts “during the crisis” but the message from the courts today is that they have not received guidance against issuing new claims so will do so as and when they receive claim forms. Given that possession of residential property via the courts generally took four to six months pre-COVID-19, our current advice to landlord clients is to proceed with ‘non-COVID-19 arrears’ possession claims as normal so they at least have a chance of securing a possession order which can be enforced at a later date when the ban on evictions ends. Clients should however allow for severe delays at the enforcement (i.e. bailiff) stage and perhaps expect possession dates in any outright orders to make allowance for the three-month period rather than order possession within, say, 7 or 14 days. Landlords wanting to commence claims for possession on the ground of rent arrears which have accrued post-COVID-19 must be more cautious as there is shortly going to be a widening of the pre-action protocol which will no doubt place strict obligations on landlords to explore payment plans etc. with tenants before issuing proceedings. We imagine that judges will be more ready to dismiss / adjourn any claims made by landlords who pre-action conduct does not fully comply with the protocol so landlords must focus on getting it right first time. This means that they should start engaging with their tenants now regarding rent payments and evidence of financial difficulty.
Q: What about section 21 notices?
A: Where a tenant is on an assured shorthold tenancy, a landlord can evict them on two months’ notice regardless of whether the tenant is at fault e.g. in rent arrears. There is nothing at the moment to indicate that landlords cannot serve new section 21 notices so our current advice is that they may continue to do so and proceed as per the ‘non-COVID-19 arrears’ possession claims mentioned in the answer above if the tenant fails to vacate.
Q: Is my tenant still liable for rent during the three month eviction ban?
A: Yes. The Government has not promised tenants a rent freeze so payment obligations in tenancies continue to apply. If a tenancy has already been properly terminated by the landlord but the property remains occupied, tenants are not liable for rent but are liable for what is known as ‘use and occupation’ charges. These apply from the date of termination to the date they give up possession of the property. Such charges are calculated at a daily rate by dividing the annual rent under the tenancy by 365. The possession order should refer to use and occupation and will be enforceable as a money judgment in the usual way. The big question is therefore ‘does your former tenant have any assets against which to enforce’?
Q: Does the ban apply to trespassers?
A: The terminology used by the Government is ‘renters’ and ‘tenants’ rather than ‘occupiers’ but, as above, the eviction ban appears to be a blanket ban so would delay evictions even of trespassers for the next three months. This is unfortunate as the purpose of the emergency legislation is clearly to protect lawful occupiers in financial difficulty rather than individuals who have moved into residential property they have no right to occupy. We hope that the legislation will give us some clarity on this point but, for now, our advice to landlords with trespassers is to proceed as normal.
Q: What does ‘financial difficulty due to COVID-19’ mean and how long will tenants be given to pay after the three-month ban?
A: It is not clear whether tenants can rely on a loss or reduction of income since the pandemic or whether they will need to go further and show, for example, that they have no savings to cover the rent. It is also unclear how much time landlords will be expected to give tenants to repay the arrears. These are both points which will need to be addressed clearly in the emergency legislation and amended pre-action protocol.
Q: What does a buy to let landlord need to show to get a three-month mortgage holiday?
A: The homeowners’ three-month mortgage holiday will also extend to buy to let landlords. We have only been given very basic details of this by the Government but the overall message is to contact your lender and look at their individual guidance and application process. It is very likely that to be successful, a landlord will need to demonstrate that their tenant is not paying rent. It is yet to be seen whether the landlord will also need to supply evidence to show that the lack of rent is directly attributable to the tenant being in financial difficulty due to COVID-19. We recommend that landlords seek this evidence from their tenants at an early stage in any case should rent arrears accrue so that it will be available should lenders request it.
Update on 24 March: Confusion persists following publication of the proposed Coronvirus Bill which falls short of the Government's promises.
The Government promised that emergency legislation would be taken forward as an urgent priority so that landlords would not be able to start proceedings to evict tenants from their homes for at least three months.
Renters were told that they did not need to be concerned about the threat of eviction during the current crisis.
However, the proposed Bill falls very short of these initial promises. The two main takeaways from the proposed Bill are:
There is nothing further in the proposed Bill and, in particular, nothing about a ban on evictions. All it achieves is an extension of the notice period that landlords must give their tenants to vacate the property once the Bill passes into law. Landlords and tenants are none the wiser today as to what will be happening to matters where:
There is nothing in the draft legislation which says that there is to be a moratorium on court proceedings. The Chancery Bar Association later issued a note stating the following:
This guidance seems to suggest that the courts will still be hearing cases but that efforts will be made to have these hearings via other means such as telephone hearings. The guidance does not say that the court will put a stop on issuing new proceedings. Indeed, the courts we have spoken to today (24 March) have all said that they are still accepting new possession claims for issue.
There may yet be amendments to the Bill but, as it stands, the current proposals will only affect the length of the relevant notice a landlord must serve before they can issue court proceedings.
Notwithstanding the above, we understand that Central London and many other county courts have put all residential evictions on hold until further notice. However, the approach does vary from court to court and some courts have informed us that they are still proceeding with pre-booked evictions, save for where they are informed in advance that the occupier is self-isolating.