Blog - 28/04/2020
The Residential Letting Landscape in the light of Covid-19
As with so many sectors, residential lettings have been adversely affected by the current Covid-19 crisis.
Some of the new measures that have been brought in by the Coronavirus Act 2020 as well as supplementary guidance that affect residential properties have been fairly widely publicised. Below are ones that landlords should be particularly aware of plus some updates on the regulations affecting residential lettings in general. Many will affect all residential tenancies and not just assured shorthold lettings.
The Government has issued guidance on home moves following the purchase of a property and that guidance should also be observed in relation to home moves for tenants. Advice is that moves should be postponed except where unavoidable. This may be for contractual as well as practical reasons. If parties are unable to reach an agreement on delay then social distancing rules must be observed. Parties are also reminded that the position of the British Removal Association to its members is not to book any new moves due to the crisis.
Under the Coronavirus Act the Government has changed the time scales for requiring tenants to give vacant possession of a properties held on Assured Shorthold Tenancies. New Form 6A Notices (also known as Section 21 Notices) now require landlords to give at least three months’ notice requiring possession of a property. The new Form 6a Notice should be used up to 30 September 2020.
Repair and maintenance
Landlords need to consider the practicalities of meeting their repair and maintenance obligations in the light of social distancing and the possibility of tenants self-isolating and self-shielding. Their obligations in general have not changed. However contractors requiring access to the property must follow social distancing rules and also take precautions in preventing any contamination being brought into the property for example from tools. Any non-urgent maintenance is probably best postponed until lockdown is lifted.
Landlords are advised to agree with their tenant whether the repairs are required as a matter of urgency or whether they can be postponed without leaving the landlord being potentially exposed to being in breach of its repairing obligations. Evidence should be kept of any agreement between landlord and tenant even if that is just an exchange of emails.
It is worth noting that the Fitness for Human Habitation Act – which obliges landlords to carry out essential improvement works on a property – was extended on 20 March 2020 to include existing statutory periodic tenancies.
A landlord’s responsibility for safety compliance also remains the same. Gas Safe compliance certificates are still required. Where a landlord cannot carry out its obligations then it will be sufficient for the landlord to show that it has made reasonable endeavours to comply – and that it has made clear to a tenant that the check is necessary for the safety and wellbeing of the tenant. Agents should also document their efforts to obtain entry to a property where it is unable to do so as well as communication with the tenants.
Electrical Safety Standards in the Private Rented Section Regulations 2020 comes into force for new tenancies on 1 July 2020. These stipulate that an Electrical Installation Condition Report (EICR) must be undertaken before a tenancy commences and all recommended works undertaken within 28 days of the report. Looking beyond the Covid crisis it is worth noting that these come into force for all tenancies – including existing tenancies – from 1 April 2021.
Once social distancing, self-isolation and self-shielding measures become more relaxed, the landlord, or the agent on its behalf, must make every attempt to ensure compliance with both gas and electrical safety regulations.
Tenant’s inability to pay part or all of its rent
Section 81 of the Coronavirus Act 2020 addresses provisions to protect residential tenants from being evicted from their property during the coronavirus outbreak. Section 81 states that landlords must now give at least 3 months’ notice when serving tenants with a Section 8 or Section 21 Notice of the Housing Act 1988. This is a significant variation to the usual notice period given by landlords to tenants, typically between immediate or 2 weeks’ notice up to 2 months’ notice. Importantly however, nothing in the Coronavirus Act 2020 invalidates notices validly served prior to 26 March 2020 (being the start of the relevant period).
Typically, residential leases do not permit a tenant to withhold rent in any circumstances. If a tenant was to withhold rent, then landlords could seek possession at court based on such non-payment of rent. However, Practice Direction 51Z was also introduced as an emergency measure to suspend all ongoing possession claims for 90 days relating to proceedings brought under Civil Procedure Rule 55. This effectively prevents landlords from bringing or enforcing an immediate possession Order against tenants although other remedies for breaches of covenant may still be available to the landlord.
If tenants are concerned about current or future rental payments, they may request a renegotiation of their lease with their landlord. Importantly however, there is no legal obligation on landlords to entertain such a request. Nevertheless, landlords may be weary of the difficulty in finding a new tenant in the current lettings climate. Landlords and tenants alike could also discuss the prospect of redeeming rent-deposits to mitigate temporary cash flow concerns and advice should be taken on recording any amended terms to the relevant agreement. Property Litigation partner Shams Rahman can advise further on related matters here.
Whilst not a result of the current crisis, landlords should note that it is now unlawful for properties with an EPC rating of less than E as of 1 April 2020 no longer applies to new tenancies but to existing tenancies.
Financial relief for landlords
Many landlords will find themselves facing some form of disruption with the lettings during the ongoing crisis. The Daily Telegraph has reported that that 80,000 landlords fear bankruptcy amidst this turmoil. Ensuring that prompt action is taken with breaches of tenancy agreements may go some way to reduce the pain.
Mindful of the financial difficulties that landlords may face due to non-payment or delayed payment of rent, most mortgage lenders – including buy to let lenders- have agreed to offer payment holidays of up to three months’ rent where required as a result of the crisis. Landlords need to discuss this with directly with their lenders.
Capital Gains Tax changes
Another change that is not covid-related but which also is another squeeze for landlords on the cash flow front relates to the timing of payment of Capital Gains Tax following the sale of a rental property. For disposals from 6 April 2020 onwards, sellers now have only 30 days from the date of completion within which to notify HMRC of the gain and pay the tax due. Tax partner Hetal Sanghvi is able to advise further on this.
We will continue to monitor the situation in relation residential lettings. If you do have any queries, please contact Rosie McCormick Paice or any member of the Residential Property team.
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Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.
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