This article was written by Erina Kourtis, Senior Solicitor, Blake Morgan LLP.
Parliament is protecting renters from eviction as a result of enacting the Coronavirus Act 2020, but the government is also looking to protect landlords from the impact of tenants not being able to pay their rent - by recommending that they enter discussions with tenants to agree alternative payment plans.
How will the Coronavirus Act 2020 impact landlords?
It is likely that many landlords will encounter cash flow difficulties as tenants may be unable to pay rent for the next few months due to the impact of coronavirus.
Where landlords are struggling with cash flow difficulties from tenants not paying rent, they can speak to their lenders to see if the lenders would allow a three-month mortgage payment holiday which would defer mortgage payments for landlords for the next three months.
Although lenders are not required to agree to this, they may do so in light of the current climate and if the landlord asking for a mortgage holiday has made payments on time and in full to date.
All new evictions are suspended and landlords cannot bring new possession proceedings to obtain possession of their property unless the notice provisions above have been complied with.
Housing associations and local authorities also fall into the category of those who will not be allowed to evict tenants who are affected by coronavirus and do not pay their rent.
It remains unclear whether landlords will be entitled to demand interest on deferred rent payments.
What should landlords do next?
Landlords should work closely with their tenants to discuss different options which will help their tenants during this period of cash flow difficulties. It should be noted that the government intends to amend the existing Pre-Action Protocols to include private landlords.
Landlords could discuss the following payment options with their tenants depending on the circumstances:
Suggest that weekly payments of rent are accepted instead of monthly payments
Offer a rent discount for a certain period
Allow a temporary rent free period
Agree a rent deferment so that rent is paid on an agreed later date
Agree a payment plan for rent which has been deferred, for instance the deferred rent may be payable on an agreed date in full or spread over instalments, or
Have regard to the requirements of the amended Protocol when it comes into force.
Anything agreed between landlords and tenants should be formally documented in writing to avoid any temporary concessions becoming permanent variations to the lease. Where there are any guarantors, they too should be a party to any such side letter.
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On the whole, the government is encouraging landlords and tenants to work together through this difficult and unprecedented time.
A positive is that landlords and tenants may communicate better going forward which could result in improved landlord and tenant relationships in the future.