Posted on Apr 16, 2020
As a landlord, you may well be used to dealing with tricky tenants who are consistently late with payments but what do you do when a once-reliable tenant experiences unexpected financial difficulty? As changes have come into place in order to tackle the coronavirus pandemic, many workers have lost their jobs or have been furloughed with 80% of their income paid by the Government. For those already living on tight budgets, this is likely to have already had a major impact on their ability to meet their financial commitments.
Applying for a mortgage repayment holiday
If you rely on your tenant’s rent to keep up with your own mortgage repayments, you may need to put a hold on your own commitments if they’re unable to pay you. To discuss your options, you will need to contact your mortgage lender directly; many are now offering online applications.
Ban on tenant evictions
From the 27th March 2020, the Government introduced a complete ban on evictions as well as additional protection for renters to stop landlords evicting tenants who are unable to keep up with the rent payments – this has initially been put into place for 90 days. During this time tenants will still be liable to pay their rent, but landlords have been asked to work with their tenant to come up with a reasonable solution. Ultimately, renters are being told to stay inside their homes even if they cannot meet repayments.
The Government has asked landlords “to show compassion and to allow tenants who are affected by this to remain in their homes wherever possible.”
While this is a positive step for many renters, giving them the much-needed reassurance that they will still have a roof over their head should the worst happen, it does potentially pose an issue for landlords with problem tenants.
Proactive vs reactive
As both homeowners and landlords alike are offered a 3-month payment holiday to help those struggling to meet repayments, some landlords are considering whether to offer the same favour to tenants. Whether this should come in the form of a payment holiday or a temporary rent reduction will need to be determined by the past history of the tenant, your own financial situation and how keen you are to keep the tenant on-side going forward. Consider what is realistic for the sake of keeping good tenants and avoiding an unoccupied property in the future.
If you’re proactive about opening up the conversation with your tenant(s), this will give you an early indication of where they’re at and whether they may need support further down the line. It may also help to build upon your tenant-landlord relationship as it shows that you’re actively trying to help them without waiting for them to ask. With that being said, many landlords conducting a reactive approach and treating each tenant on a case by case basis will find this approach just as effective, without opening up the floor for people to take advantage.
If you know that your tenant is working from home and is still on full pay, but they ask for a payment holiday nonetheless, open up with the conversation but reserve the right to refuse their request. You are not obliged to agree to a payment holiday simply because there is a pandemic if your tenant remains financially unaffected.
Assessing tenant affordability
David Cox, chief executive of ARLA Propertymark, suggests that in order to understand whether a rent reduction is necessary, landlords should retake the initial affordability check on the tenants’ finances.
‘It’s important to understand what tenants could afford on any reduced or furloughed income,’ he explains.
‘It would also need to be made clear whether this is a temporary rent reduction or a deferral.
‘If it’s a deferral, a payment plan will need to be set up to ensure the tenant clears the rent arrears that are accrued during this period.
‘Additionally, landlords and agents will need to be clear about whether they will implement the interest clauses that exist for rent arrears on most tenancy agreements.’
Navigating exceptional circumstances
While in most usual circumstances, allowing for a payment reduction could be in breach of your contract, in these unprecedented circumstances, it’s very unlikely that your mortgage lenders will dispute this. Once you have come to an agreement with your tenant, you just need to get a letter in writing confirming the dates and rental amount you have agreed – this should be signed digitally by both parties. Ensure to make your lenders aware of what you have agreed.
Will my insurance be affected?
If you’re concerned about how any changes will affect your Property Owners Insurance policy, or you want to know exactly what you’re covered for in terms of Loss of Rent and more, just give Watkin Davies a call on 02920 626 226, we’ll talk you through anything you need to know.
"Very efficient, always friendly and helpful. I have used Watkin Davies for years, and they have always been competitive. I received great support recently when I had to make a claim, so I'd highly recommend them."
"I was very impressed with the quality of the service - it was outstanding. The advisor, Ms Spear went above and beyond to give me the best driving insurance policy. The policy I have received is exactly what I was looking for. Thank you so much Ms Spear!"
"I've used Instructorcover Plus for my driving instructor insurance for a number of years. Not only are prices competitive, even at renewal, but customer service is fantastic. Call operators are always cheerful and incredibly helpful. Everything is always sorted in a single call, saving valuable time. Highly recommend."
"Absolutely superb service from the team, particularly Natalie. Very easy and simple process"
"As aways very efficient"
"I have used InstructorcoverPlus for my driving tuition insurance for a number of years. Their prices are always competitive and everyone I speak to is friendly and helpful."
"Ceri was very helpful and knowledgeable on the phone"
"Karrie Brewer was so helpful today, especially as one insurance company would not quote, so had to shop around for us, many thanks"
"Kelly is amazing. Very helpful and friendly, did a great job today with helping me out to get insured. Amazing service!"
"Great service. Got my first driving instructor insurance with this firm. Price was competitive and customer service provided by Jane was great. I will definitely recommend the service."
"Team were very helpful when it came time to renew my policy, taking the time to check and make any amendments needed. Would highly recommend."
"5 stars!"
"Excellent service from Watkin Davies as per usual. I love the way they do all the hard work researching best quotes and provide you with your options. All the staff are very friendly and professional, I have to highlight Ceri who always does a fantastic job for me and my family."
"Really helpful and efficient customer service, friendly and knowledgeable too. I would highly recommend InstructorcoverPlus."
"I m a returning customer and what a wonderful experience. Emma is new to her role but she was very helpful and polite throughout. She got the quote done very quickly and managed to beat all my other quotations. I therefore didn't have to waste any more time. Further she offered me three instalments at 0% which is helpful in this current economic climate. The paperwork was sent straight away. Highly recommended."
"Once again, could not have been more helpful! Still a pleasure to speak to a 'real person' who knew what they were talking about!"