As part of the post-COVID transition, the government has introduced a new package of support measures for renters. Here is a quick guide to what you need to know.
The new rules in brief
From now until (at least) 31st March 2021, landlords will need to give tenants a minimum of six months’ notice before commencing any legal action to regain possession of their property. There are five exceptions to this where shorter notice periods may be applied. These are:
- breach of “Right to Rent” rules (3 months)
- over 6 months of accumulated rent arrears (4 weeks)
- anti-social behaviour (4 weeks)
- making a false statement (2-4 weeks)
- domestic abuse (2-4 weeks)
Additionally, from 20th September, if legal proceedings are raised, landlords must provide judges with all relevant information about their tenant’s circumstances, including the impact of COVID19. If they do not, the judge may adjourn the proceedings.
What the new rules mean in practice
Realistically, the only one of these rules which is likely to be a major issue for landlords is the one about accumulated rent arrears. This is likely to be particularly grating for landlords with mortgages. They will be expected to make their monthly payments even though they have no income from the property.
Hopefully, most, if not all, landlords in this situation, will have insurance and/or some other way of making the payments. If not, then they may need to work with their lender to determine a path forward. This may involve an agreement to sell the property as soon as feasible. In the worst case, it may involve foreclosure.
The path towards the long-term post-COVID future
In principle, nobody knows what the future will bring until it arrives. In practice, the current direction of travel in Westminster seems to be one of more protection for tenants. At some point, the government (or a government) is going to need to address the increased risk this creates for landlords. Until then, however, landlords are going to need to select their tenants very carefully (or exit the residential buy-to-let) market
Rather ironically, however, landlords will also need to be very careful not to put themselves on the wrong side of the law when they select their tenants. Firstly, it is legally questionable to place a blanket ban on letting to tenants on benefits. It’s also questionable how much sense this makes given that tenants can end up on benefits during a tenancy. Secondly, landlords must be very careful to avoid breaking the Equality Act 2010, particularly when carrying out “Right to Rent” checks.
Alternatives to residential buy-to-let
The dynamics of the UK’s property market mean that it’s hard to see residential buy-to-let becoming unprofitable – provided that investors approach it in the right way. At the same time, it’s understandable that some buy-to-let investors may want to investigate other options. Here are some you may wish to consider.
Taking in lodgers
Instead of letting out whole properties, you could look at properties which are large enough for you to live in yourself and have space left over to let out.
Short-term lets
In cities, short-term letting has become somewhat controversial. In rural areas, however, short-term lettings often provide a much-welcomed boost to the local economy. At present, the “staycation” market is keeping the sector going very nicely. Over the long term, it’s to be hoped that international tourists will return.
Holiday lets are one area which might actually benefit from Brexit. If the UK’s exit from the EU leads to a weaker pound, then the UK will become more affordable to international tourists.
Commercial property
Even if there is a reduced demand for office space, there will still be a need for other kinds of commercial property.
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