How Will the Pandemic Affect Renting in the UK?Written By PropertyLoop June 03, 2021
Many have been left asking over the last year how will the coronavirus pandemic affect renting. Despite many aspects of the effects of the Coronavirus being described as uncertain, the results of the dire financial outlook of many renters, alongside lacklustre government initiatives has yielded a far more predictable outcome for a concerning amount of private renters.
In the face of new government measures to reduce the amount of notice landlords are required to provide to tenants facing eviction, before the matter is presented to a court, the National residential landlords Association has revealed that hundreds of thousands of private renters will face “severe” hardship when it comes to finding their next home. The organisation has further stated that a quarter of tenants that have accumulated rental arrears since the beginning of lockdown are now in debt to their landlord for amounts exceeding £1000, and with the notice period for serious rental arrears being a mere two weeks, not only are a significant amount of tenancies hanging in the balance, but the debt brought about by the pandemic will leave a permanent blemish on the financial records of the effected tenants.
This is not to say that the burden of rental arrears is excusive to the tenants. Naturally, if the circumstances prevent them from making their regular rental payments the landlord’s income is jeopardised, leaving them to not only support the tenant, but their property portfolio on a drastically thinning income. And whilst the government’s eviction ban has been hailed by many as an initiative that prevented mass homelessness, it could be argued that with unavoidable arrears now impairing the credit history of many renters, it merely delayed the larger problem.
Of course when renting landlords will ensure that the occupants of their rental properties are the ideal fit for the opportunity they are offering. To this end the overwhelming majority will ask any prospective tenants to go through the referencing process allowing landlords to have a detailed assessment of the applicant’s rental history and, more importantly, their financial suitability, and this is where the problem arises. These affordability checks are a staple of the industry and if a landlord finds that a tenant has accumulated rental arrears in a past tenancy, or failed to clear historical lines of credit hey are well within their rights to pass on the tenants and offer the tenancy to another renter.
The charity Stepchange places the figure for the current amount of outstanding debt at a cool £360m, with the housing organisation Shelter also warning that almost two million renters have expressed fear that they will lose their home in the near future now that landlords have been re-empowered to take action against them. This has once again resulted in an outcry from vulnerable tenants that are demanding additional financial support be offered, similarly to elsewhere in the UK. Currently those that rent in Scotland and Wales are able to take out an interest free tenant hardship loan, allowing them to stave of the detrimental impact of months of rent arrears, keep their home and ensure the predictability of the landlord’s income is restored.
Changes to Eviction Rules During the Pandemic
With the economic impact of the coronavirus outbreak being no secret the UK government received please from multiple campaign groups, renters and property owners alike to put in place measure to support the rental industry throughout the pandemic. As we all know many that faced furlough whilst still receiving an income, was heavily reduced, and with no obligation for the housing allowance of universal credit to actually cover rental payments, merely contribute towards them; it could be argued the effectiveness of the implemented measures could have gone further.
Equally as divisive has been the overhaul to the eviction procedure landlords have been forced to navigate over the last year or so. With the introduction of the Coronavirus Act 2020, thousands of repossessions through bailiff enforcement were halted, leaving existing eviction procedures dead in the water, much to the frustration of many landlords trying to remove problem tenants. However, the safeguarding measures brought about by the Coronavirus Act drastically increased the amount of notice a landlord is legally required to provide the occupants of their rental property before eviction proceedings are taken to the courts. Before the initial lockdown in March 2020 any landlord that wished to reclaim possession of their rental property would still have to provide their tenants with notice of eviction; however this was often a maximum of a few months, with more severe circumstance being able to be presented to the courts within a matter of weeks. With this in mind some landlords fiercely opposed the drastic extension of the minimum notice period that could now be enjoyed by renters, claiming this was infringing on their ability to manage their investment and protect their own business and income.
Providing that the owner of the rental property issued their tenant with a notice of eviction between the 26th of March 2020 and the 28th of August 2020, a minimum notice period of three months needed to be given in order for the notice to be upheld. As we know, as the impact of the virus became more realised additional support for private renters and property owners needed to be provided and further extensions to the amount of notice tenants should be provided with was extended further. To this end any notices of eviction that were issued by landlords anywhere between the 29th of August 2020 and the 31st of May 2021 would be been legally required to provide the tenants with a minimum notice period of at least six months before the eviction proceedings could be presented to a court of law.
With these revisions in mind, the UK government has once again made a move to protect the interests of the rental sector. As of the 1st of June 2021 the eviction ban that has prevented landlords from using the courts to enforce their evictions through bailiff action has been lifted, making these resources available to rental property owners once again. However this will not be the immediate resolve that many landlords were hoping for as the court system is facing months of backlogged legal proceedings that must now be faced, meaning there is still likely to be a delay in reclaiming possession of rental properties. Further to this, the move comes as part of the government’s initiative to cautiously wind back the steps implemented during the pandemic, establishing a renewed course of action to return some level of normalcy to the rental landscape.
With this in mind the new changes to the eviction process have been welcomed by landlords as they are the first time the UK government has taken steps to reduce the amount of notice that property owners are required to give before eviction proceedings. The new measures have seen the minimum amount of notice tenants receive before eviction proceedings are taken to court be drastically reduced from a massive six month wait, to just four months. Of course this is still double the amount of notice tenants would receive under “normal” circumstance allowing for ample time for any disputes or rent arrears to be somewhat addressed.
As for landlords that are hoping these extensions to eviction notice will come to an end soon, the government has announced that further changes will be implemented as soon as the 1st of October 2021. After this date landlords will see the return of “business as usual” with the minimum amount of notice that property owners are required to provide their tenants falling back to two months.
What to Do if a Tenant Becomes Unable to Pay Their Rent Due to the Pandemic
As can be expected the outbreak of the coronavirus has had a significant impact on the income of bother renters and landlords to say the least. The debt charity Stepchange has reported that since the initial lockdown measures were implemented by the UK government in March 2020, tenants have accumulated a breath taking £360m in rent arrears. Making the financial outlook for renters across the UK even bleaker, the National Residential Landlord Association has revealed that almost a third of tenants that have been unable to make their regular rental payments during the pandemic have amassed rent arrears of over £1000.
Understandably with a record number of tenants no facing pandemic rent arrears, this will have a profound influence on how landlords are able to operate during this time, not to mention the impact this will have on their own income as they will depend on tenants being able to uphold their commitment to make these payments.
With this in mind it is essential that both parties of the rental agreement are able to reach some sort of agreement to the mutual benefit of upholding the tenancy agreement, as is in the best interests of both parties. If you are a tenant that is apprehensive about meeting their next rent payment it is important to notify the landlord well in advance, allowing time for the situation to be addressed, whilst showing your landlord that you are actively trying to work with them and prevent excessive rent arrears. To this end rental property owners could be able to establish a payment plan with their occupants, allowing them a set period in which to repay the accrued arrears without putting them at risk of further endangering the tenancy. Of course, with a great deal of the UK currently receiving financial support through the furlough scheme or universal credit allowance, many tenants may not be able to pay their usual rental payments, with additions being made for the repayments. A more long term solution could be to negotiate a temporary reduction in the amount of rent that you pay each month, with the difference and any arrears being paid back in smaller incremental amounts.
If a payment plan can be reached with the owner of the rental property it is imperative that both parties maintain a record of the agreement in writing, detailing the frequency of the repayments alongside the amount being repaid each time. Whilst this may not be an ideal outcome for the landlord, any amount paid in rent will work towards helping them meet their own commitments towards their buy to let mortgage, possible remedial work to be carried out on properties and other managements costs; with a further incentive being the opportunity to avoid a lengthy and significantly more expensive eviction procedure and possible disputes. Additionally if the landlord does reclaim the property, costs will then be incurred for marketing the opportunity and referencing new tenants that will likely be in a similarly precarious employment position.
It goes without saying that the individual circumstance that each tenant will find themselves in will vary; property owners can take steps to assist their tenant in reaching a more stable financial situation. At the very least landlords can direct their tenants to where they can receive financial support, and with many of these schemes being payable directly to the landlord this could get the tenancy back on track far faster.
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