The disruption of normal life is escalating daily as COVID-19 continues to fundamentally alter business, society and the way we work.
On Wednesday 18 March 2020, the UK Government announced that it will be introducing emergency legislation to Parliament which would prevent landlords bringing proceedings for possession of residential property for at least a three-month period. The rationale behind the emergency legislation is to protect renters whose income and therefore ability to meet their rental obligations may be affected by COVID-19. Simultaneously, the government announced a three-month mortgage payment holiday for landlords whose tenants are experiencing financial difficulties due to COVID-19. These measures should, in theory, alleviate pressure on landlords, who will be concerned about meeting mortgage payments if they do not have the usual rental income stream.
It is not yet clear whether all new possession claims will be prohibited, or whether the new legislation will only apply to those claims which relate to arrears of rent. It is also unclear whether the new legislation will ‘freeze’ current possession claims already issued. Many landlords would argue that it is unfair to restrict their right to occupation of properties where tenants have failed to pay rent prior to the COVID-19 pandemic. The language of government and politicians suggests that the legislation will focus primarily on tenants unable to pay rent because of COVID-19. However, the Courts are influenced by policy. The short-term legislative approach will clearly be pro-tenant. Social pressure may leave Judges reluctant to grant possession orders to evict tenants not affected by COVID-19.
The government has insisted in its guidance that following the restrictions on possession orders and mortgage holidays, landlords and tenants are expected to agree a repayment plan for outstanding rents. Landlords should be prepared to have their contractual and statutory rights limited by law beyond the initial three-month period, either due to any extensions on restricting possession claims or post-COVID-19 protection for struggling tenants.
The government appears to be leaving the structure and terms of repayment plans to landlords and tenants to agree, focusing on each tenants’ individual circumstances. Whilst the health and welfare of society is currently the main priority, landlords will be eager to see the return of their rental income stream once the immediate impact of COVID-19 has subsided.
As with many aspects of day to day life which have been affected by COVID-19, a lot of questions remain to be answered. Will lenders be party to these repayment plans to bring outstanding mortgage payments in line with outstanding rent? Additional parties will inevitably delay finalising the terms of repayment plans and increase costs. Will landlords be able to bring possession claims if tenants are in breach of any agreed repayment plan? How favourably will Courts look upon the position of landlords where they are faced with a tenant struggling to meet these plans due to the knock on effects that COVID-19 and unemployment are having on their business or lives? Will the current climate mean evicting tenants is generally seen as undesirable, no matter the reason? Will landlords be able to enforce pre-existing possession orders, and what about situations where the tenants or trespassers are self-isolating?
The impact of COVID-19 on possession claims will likely extend beyond the initial 3 month restriction . A delay in proceedings for a minimum of three months will create a backlog in the Courts which will have consequences for hearings scheduled in the future. The Courts and government will hope that the response of lenders, landlords and tenants to the emergency legislation is to deal with the economic impact of COVID-19 through taking a pragmatic approach to debts that fall due. That way, all interested parties can minimise the chances of COVID-19 evolving from a short-term to a long-term issue for the property market.
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