While it’s great that the UK Government is proving to be supportive and encouraging towards financial forbearance during the Covid-19 pandemic, it’s essential that landlords and letting agents manage the situation carefully to avoid difficulties in the future.
Where rent payment holidays are agreed or other informal changes between landlords and tenants arise, a system must be put in place to help closely monitor, manage and record exactly what should be happening right now. It’s also important to have an eye to the future and have clarity on when and how any payment holidays or temporary rent reductions are repaid.
No explicit guidance on rent payment holidays
Although the Government hasn’t explicitly stated that landlords and letting agents must agree a payment holiday or new, temporary rent payment terms, with no new evictions permitted (unless they’re absolutely necessary), it is something that is certainly implied. It’s also likely that many landlords will want to actively help their tenants out during the coronavirus pandemic. This could lead to a number of informal agreements where tenants can pay lower rent or even have a payment holiday for a month or more.
For landlords, the Government has said BTL mortgages can now be included in the three-month mortgage repayment holiday that home-owners have been granted. That means this could be used to help tenants who are struggling to pay their rent due to loss of income.
However, any landlord who does agree on a new, temporary rent payment schedule needs to ensure the tenant understands it in the same way. One way to that could be to write an email or even a text message, send it to the tenant and gain a response from them that they understand the agreement.
This is also a useful tool to outline when you expect the usual terms of the original tenancy agreement to come back into use.
“Many landlords will be open to helping their tenants during tough times,” said Neil Cobbold, chief sales officer at PayProp.
Cobbold also adds that where a letting agency receives notification from tenants that they can’t pay their rent, the agent needs to let the landlord know immediately. This will ensure the landlord and agent can work together and the agency can also note down any new, temporary agreements put in place regarding rent payments.
When should landlords use their 3-month BTL repayment holiday?
If you don’t need to use the three-month mortgage payment holiday, even though your tenant or tenants are paying less rent for a temporary period, then the best advice is not to use it. That’s because when you use a repayment holiday it extends the term of the mortgage.
In cases where taking a BTL mortgage repayment will make it easier for you as a landlord to exercise forbearance with regards to your tenants and also ease your own financial situation during the crisis, then it can make sense to do so.
It might also interest you to know that after initially stating it wouldn’t be offering its BTL customers a mortgage repayment holiday under coronavirus crisis rules, it has now made a u-turn and is offering BTL mortgage customers the same repayment holiday opportunity as home-owner mortgage customers.
Where you would need a mortgage repayment holiday in order to provide your tenant or tenants with temporary changes to their rent payments, you should ensure you can take that repayment holiday before agreeing on a temporary rent reduction or payment holiday.
The coronavirus pandemic is tough for everyone. However, with the right planning and discussions, the lettings market and landlords will weather it and remain in business once it ends.
