RENTAL PAYMENT ADVICE FOR LANDLORDS DURING THE LOCKDOWN

Dear All,

Firstly we sincerely wish that you and your loved ones are all safe and well.

During the current lockdown, we have found a number of tenants have been hit quite hard financially either having lost their jobs, having been placed on furlough or they have to rely on a partner's part time income or help from their parents. This unfortunately means that a lot of these tenants are struggling to pay the rent and make ends meet.

In the last 10 days, we have had a few enquiries raised by both our landlords and tenants about what they can do in these difficult circumstances.

Many tenants are self-employed or freelance and although now the government has put in place measures to help self-employed people, this will not be implemented until June. So many tenants are now asking for a temporary rent freeze until such time that they can get financial help from the government. This is not an abdication of their rental obligations for that period, but a deferment of rent until a later date at which point they can make plans to pay this back on a monthly basis.

With this in mind and based on our recent experience and negotiations on behalf of our Let & Manage Landlord clients, we have compiled the below list of advice and helpful tips for Landlords that we believe to be good practice during your negotiation with your tenants and would be advisable to follow in the interest of helping you and your tenants during these difficult times.

1. If your tenants approach you asking for help in this way, you must ensure that all correspondence and any agreements are made IN WRITING (preferably via email) This will cover everyone involved in case of any disagreements further down the line. Make sure you have a good email trail of ALL of your correspondence.

2. Once you have received this request from your tenants, depending on your relationship with them, you may ask them for proof of their circumstance. i.e. proof of redundancy, lower income or confirmation that they have been placed on furlough. Please do consider that ultimately, your relationship with your tenant will determine whether it is essential to demand such proof of their hardship.

3. If your tenants are employed full time, it would be advisable to ask if they have been placed on furlough. If they are still receiving 80% of their income as a result of this furlough, then in theory you could agree only a 20% drop in their rental payments for the agreed period however you have to consider that they may be worried that their employers will make them redundant after the furlough period has ended and so they may naturally ask for a larger drop or a full rent freeze for a month or two so that they can conserve their cash (just in case). As is our advice throughout this article, each case on it's own merits and it really depends on your relationship with them and their overall track record as tenants (paying the rent on time and looking after your property and keeping it clean and tidy etc).

4. Remember to ensure that in your email correspondence with your tenants, that you clarify to them that this is NOT a waiver of rent, it is a rent payment delay and will need to be repaid within an agreed timeframe. At the end of the agreed term, you and your tenants will need to discuss a payment plan. YOU MUST EXPLAIN THIS TO THEM IN WRITING. We recommend a payment plan of 3-6 months after the lockdown has been lifted to avoid any further rent backdating.

5. You may only be willing to freeze their rental payment for 1 month. In this case, we would advise that at the end of this month you review their circumstances at the end of this month and proceed according to this.

6. Based on government guidance, your lender may give you the option of a mortgage payment holiday. This again, is a deferment of mortgage payment for up to 3 months which may help you whilst you are not receiving rental payments. Please however remember that if you have been accepted for a 3-month mortgage holiday, this will need to be repaid. You may be helping your tenants temporarily by giving them a payment freeze (because you have obtained a payment holiday from your lender), but in the long term this will cost you more due the lender adding the missed payments to your loan and adding interest which you cannot demand from your tenants.

7. Following on from point 6, instead of taking up your lenders offer for a payment holiday (to help your tenants with a rent freeze) it may be more prudent to cut your own household costs, for example online shopping and cancelling direct debits and subscriptions for non-essential products or services and negotiating better rates with your utilities or switching. You may be surprised by the amount of money you could save.

8. As mentioned in point 3, instead of freezing their rent, you may instead wish to compromise with your tenants and offer to reduce their rent by say 50% for 3 months so you are still helping the tenants whilst not losing out completely. This also makes it easier for the tenants to pay back on a monthly basis whilst you are still able to contribute to your mortgage payments.

9. If you are in a financial position to do so, and you feel it would be a good gesture to your tenants (because they have been excellent tenants) you may wish to propose a reduced rent of say 20% off for 3 months whereby they do not have to pay you back the 3 x 20% on the basis that the rent payments return to full rent from the 4th rental payment.

10. The official government guideline on this issue is that landlords must negotiate terms with their tenant rather than issuing a notice to vacate for non-payment of rent and that if you wanted to give them notice to vacate, the notice period is now 3 months not 2 months (this may change at any point during this lockdown too). In any case, if the tenants do not vacate at the end of the 3 month's notice you give to them as they are homeless, the legal process (which can take a few months in normal conditions anyway) may take an even longer time due to the backlog of cases in the courts when they resume their duties. So with this in mind, we strongly advise that you consider all of the above options if you should be faced with this dilemma.

Summary:

If your tenants have been with you a while and have always been good tenants, it would be quite unfair to punish them in such difficult times where they have already been hit financially and been forced to ask for help, so we ask you to consider this and try to be empathetic to their situation. It will come back to you positively many times over in the long run. Clear, decisive and prompt communication with genuine empathy at the heart of your message is key.

If your property is currently managed by an agency and they have not given you this advice and/or their negotiation with the tenants on your behalf has not been too great in your opinion, now may be a very good time to shop around for an agent who is empathetic to both parties in a tenancy for mutual benefit.

Important note: The above advice are general guidelines only. You should seek independent legal advice if you have a complex issue with your tenants and/or your lender that needs to be resolved.

If your property is based in North or East London, we are here to help! We are offering a free general advice chat for up to 20 minutes, so if you have any questions or queries or would even like to chat about current market rental rates and how it may affect your property, please give us a call on 0207 275 8000 or email us at enq@courtneys-estates.com. We look forward to hopefully helping you with your property related queries and to ease your worries during these challenging times.

We will leave you with this wonderful and apt quote relevant to the subject in this article:

"Compassion and tolerance are not a sign of weakness but a sign of strength."

Look after yourselves and Stay Safe.

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