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Coronavirus is affecting everyone. People have lost their jobs and many are sick. The Prime Minister is concerned enough to put the country in lockdown, with everyone instructed to stay indoors unless it is absolutely necessary to buy food, collect medication, or go to work. This is a good thing, although it won’t be much fun for many families. The good news is that deaths in Italy have slowed down in the last couple of days, which suggests social distancing may be working.
How Does all This Affect Landlords?
Let’s find out, but before we continue, remember, it’s important not to panic. Yes, the Covid-19 virus pandemic is serious, but we’re lucky enough to live in one of the richest nations in the world, with a fantastic NHS to take care of us. There are measures being put in place to protect people and the economy, from replacement salary payments to mortgage holidays.
So, with that in mind, read on to find out how landlords are impacted by Covid-19 – and what they can do to keep their buy to let businesses intact.
Property Voids
Property voids are unavoidable right now. Universities have closed and students have all gone home. There are also travel restrictions in place that prevent people from flying in and out of the country. You may have tenants that need to end their tenancy early because they have lost their job and want to move back in with family.
Whether tenants have changed their minds about renting your property or want to move out early, take a sensible view.
You can legally enforce the terms of the tenancy agreement and make the tenant pay rent for the remainder of their tenancy but consider negotiating a discount or not charging them for some or all of the remaining period.
In the case of a tenant who has pulled out of a rental agreement, rather than holding on to their deposit, deduct your fees and let them have the rest of their money back.
Bear in mind that mortgage lenders are allowing landlords to take a three-month mortgage holiday. As such, it’s unfair to penalise tenants for a situation that’s out of their control.
Marketing Tenanted Properties
Most tenants aren’t going to want random people walking around their home because it’s an infection risk, even if they are not self-isolating. Furthermore, all non-essential movement is banned for the next few weeks. For this reason, it’s better to wait until your tenants have vacated the property and you have cleaned it to remove all possible traces of contamination before you market it.
Don’t do what this Foxton’s employee did and tell a tenant to go and self-isolate “somewhere else” because they “have to allow viewings”.
Marketing Empty Properties
Now is not the best time to be marketing a vacant property, as far fewer tenants than normal will be looking for a rental. However, don’t throw in the towel immediately. Some people will inevitably be seeking rental accommodation, so stick to your usual marketing channels.
Face-to-face viewings are not recommended, for obvious reasons. Instead, switch to video marketing. Conduct virtual tours of your properties and post these on your property listings. Remember that the videos must be an accurate representation of the property and you can’t ignore any obvious faults, such as rising damp and rotten windows.
The other option is to hire a letting agent and let them manage the viewings.
Rent Arrears
One of the biggest concerns for landlords is what will happen if a tenant loses their job and can’t pay the rent. Many businesses are being forced to cut staff or reduce their hours to cope with difficult trading conditions. Other people are having to self-isolate or are sick. Unsurprisingly, tenants have less money, and some will struggle to pay the rent.
If your tenant informs you they can’t pay their rent for whatever reason, it’s essential that you exercise some compassion, as this landlord did. Offer some reassurance to your tenant, let them know you can work this out. Remind them that there is government help available such as employment support allowance for self-employed people and universal credit for the unemployed. People can now claim from the first day they fall sick or self-isolate, rather than having to wait.
Under the new possession rules (see below), landlords will have to help their tenants put in a claim for universal credit. You will need the tenant’s permission to speak to the DWP on their behalf, which may not be possible if the tenant is sick or self-isolating. Claims can be backdated, however.
The government has also put measures in place to guarantee up to 80% of workers’ wages (up to a maximum of £2,500 per month) for workers forced to stay at home by their employer. The money will be paid directly to businesses. This will help smaller businesses keep employees on the payroll, even if they can’t afford to pay them.
Even if a tenant is only be paid 80% of their usual salary, they should still be able to afford their rent, as other areas of expenditure, such as commuting costs, will be lower. If this is not the case or the tenant was previously self-employed and has taken a significant wage cut, you might have to be more flexible.
Give them a payment holiday if you can afford it. Work with your tenant to come up with an affordable repayment plan that suits their circumstances. Pay it forward and someone might help you out the next time you’re in trouble.
Rent Guarantee Insurance
Many landlord insurance policies include a rental guarantee add-on. This lets landlords claim on their insurance if a tenant defaults on the rent. However, you may find that your insurer won’t pay out for coronavirus claims.
An article in the Guardian suggests that landlords may find it very hard to successfully claim on their insurance if a tenant defaults on the rent. Direct Line, for example, will only pay out if a landlord has issued a Section 21 or Section 8 notice. Since the government has put a temporary stop on all evictions, this means a landlord has no grounds to claim for unpaid rent.
Speak to your insurer if you need to claim for unpaid rent. Most will review each claim on its individual merits, so all is not lost.
Evictions and Possessions
There is a three-month ban in place on tenant evictions. During this time, landlords won’t be able to start eviction proceedings, even if they want rid of a tenant for reasons unrelated to rent arrears caused by Covid-19. The measure is designed to help vulnerable tenants who may be sick or need to self-isolate to protect vulnerable family members.
The downside to this ban on evictions is that landlords will have no way of removing a tenant engaging in anti-social behaviour.
The NLA advises landlords don’t serve an eviction notice during the suspension. Instead, they should wait for further updates from the government.
Once the ban has ended, private sector landlords will once again be able to issue eviction proceedings, but they will have to follow the same protocol as social landlords. This includes sorting out benefit issues, implementing a repayment plan for rent arrears, and postponing court action for as long as possible.
Property Maintenance
Property maintenance is going to be tricky if your tenant is self-isolating or sick. Whereas you’d normally be able to ask for access to carry out work or allow a gas engineer to service the boiler, for example, it might not be possible.
If essential repairs or gas inspections can’t be carried out in the required time period, ask your tenant to confirm in writing why access to the property is not available. Make arrangements to do the work once they are no longer self-isolating.
The only time this is not the case is when a repair is so urgent that to not do it would represent a danger to life (i.e. a gas leak). This also applies to a loss of heating, hot water, or sanitation. Be sensible if your tenant is sick or self-isolating. Request immediate access for contractors and ask the tenants to stay well out of the way, for example, in a different room with the door closed.
If in doubt about how to handle an urgent repair, contact the HSE for advice.
Holiday Lets
The travel and tourism sector have been particularly badly hit by the Covid-19 pandemic. Airlines have cut flights or stopped flying altogether, hotels are closed, and the short-term lettings sector is likely to be decimated this year with cancelled bookings left, right, and centre. Big sites like booking.com and Expedia have seen bookings slump and many smaller operators have gone from 80% occupancy rates to 0%.
Airbnb has announced that guests and hosts can cancel bookings free of charge without incurring any service fees or penalties. This applies to all bookings made before March 14th. Bookings made after this date will be subject to the host’s usual cancellation policy.
Landlords whose business model is short-term holiday lets are probably in for a rocky ride. If you have a mortgage to pay, you can apply for a three-month payment holiday. Look at other areas where you can cut costs or try advertising for long-term tenants instead. Depending on where your property is located, you might be able to attract some tenants by offering discounted rates, especially for longer stays or future bookings.
More affluent people from the southeast have been leaving cities like London and heading to more remote areas to self-isolate away from the crowds. This has caused friction with local residents in rural areas, but if you own a holiday rental somewhere scenic, you may be able to find a tenant happy to pay a discounted rent for a month or two.
Take a leaf out of the book of Airbnb landlords in the US. Many are advertising their properties as Covid-19-FREE vacation hot-spots, using the fact they are isolated and well-stocked with essentials such as toilet roll and food as a selling point. You could try this if you own a scenic log cabin in the Lakes or an isolated cottage in Cornwall, but good luck finding toilet roll for your guests!
Try not to panic if you operate a portfolio of holiday lets. The sector will bounce back once travel restrictions are lifted. After all, people are not going to stop taking holidays forever. Cut costs as much as possible and contact your mortgage lender if you have cash flow problems.
Buy to Let Mortgages
Many landlords will be understandably concerned about meeting their buy to let mortgage payments if a tenant falls into arrears. The government has announced that mortgage payers will be given a three-month payment holiday if they need one.
The good news is that the mortgage holiday will also apply to landlords. However, you must be able to prove that your tenant has been affected by the coronavirus and your mortgage payments must not be in arrears. If you are in arrears, mortgage lenders can’t start any court action against you and existing repossession orders have been suspended.
Any arrears will accrue, so be prepared to pay off the debt once you resume repaying your mortgage as normal. Speak to your lender to agree on a repayment plan.
Remember, this is not free money and any deferred payments will still need to be repaid. Ask if the term of the mortgage will be increased once payments resume, or whether payments will go up instead. In addition, check with your lender to make sure your credit rating will not be affected if you apply for a mortgage holiday.
There is scope for the mortgage payment respite period to last longer than three months, but it will probably depend on the circumstances.
If you have cash flow issues and don’t think you can pay your mortgage, contact your lender immediately. Given the unprecedented nature of this event, it’s likely that lenders will be sympathetic. Most lenders would rather help their customers by reducing payments or freezing interest than go through the process of repossessing the property.
Don’t wait for things to get really bad before you reach out to your lender. As soon as you suspect your monthly payments are in jeopardy, give the lender a call. Bear in mind that lines will be extremely busy right now, so be prepared to settle in for a long wait on hold whilst listening to some cheesy tunes.
Infection Control
If a tenant moves out during this period, it’s important to take even more care than usual when cleaning the property. While you will probably clean kitchens and bathrooms as a matter of routine, as well as vacuum and tidy up, it is sensible to do a deep clean.
Bleach is the best weapon against flu viruses, including coronavirus. Wipe down all hard surfaces with a bleach solution. Focus on door handles, window openers, and anywhere hands might have touched.
Wear gloves and face masks while you are cleaning and be scrupulous about not touching your face. Wash your hands regularly. Remove your clothes once you return home and put them straight into a hot wash.
Encourage tenants to clean their properties, including communal areas of HMOs. If you know a tenant was sick, pay extra attention to cleaning the property and consider investing in a hand-held steam cleaner to ensure harder to reach areas and large surfaces, such as tiled walls, are spotless.
HMO landlords
Speak to tenants about infection control and remind them to keep communal areas clean. Discuss what they need to do if someone in the property becomes sick. If this does happen, that person should have sole access to the nearest bathroom and be provided with food and other essential supplies while they self-isolate in their room. Make sure the other tenants are willing to be responsible for any sick members of their joint household. If necessary, provide a microwave for individual rooms and additional cleaning supplies.
If your HMO is populated with older, vulnerable people, monitor them more closely, as they may struggle to get out and obtain essential supplies. Consider helping out by providing essentials or picking up medication as needed.
Selling an Investment Property
Before coronavirus struck, the property market was beginning to pick up following the election. Property transactions rose by 12.7% in January and RICS data showed prices were rising as of early March. However, as the virus has taken hold, it is increasingly clear that infection fears are hitting property viewings. More and more people are going into self-isolation and buyers and sellers are putting their plans to move on hold, either voluntarily or because they have no choice.
Experts say house prices are unlikely to crash, but they could slump around 20% as social distancing measures bite. The number of property transactions has fallen and Rightmove says many sales have failed to complete in the last few days. However, with fewer people travelling abroad this year, sales may well pick up again over the summer, so all is not lost.
While this might be a problem if you were hoping to sell a property in the short-term, it’s unlikely to be a long-term issue. Once things get back to normal, as they inevitably will at some point, property prices will recover, and the market will begin moving again.
So, as with any investment, don’t make any rash decisions. Unless you absolutely need to offload your portfolio RIGHT NOW, wait until prices recover. Otherwise, be prepared for viewings to work a little differently.
Rather than an in-person viewing, let buyers have a live-video viewing instead, where you show them round via Skype or FaceTime. You can zoom on areas they want to see up-close.
Sell up or Stay Put
If you were planning to sell one or more properties before the pandemic, you’re probably wondering which way to turn right now.
Unless you are desperate to sell no matter what, it’s probably sensible to delay until property prices pick up again. Otherwise, you risk taking a big hit on your sale price. But if you need rid of a property for any reason, shop around for an agent – there should be plenty of scope for negotiating sales fees given the current state of the market.
Keep in Touch With Tenants
Keeping in touch with tenants is sensible. If they are sick, self-isolating, or have just been made redundant, it’s helpful to know how you can help them. Drop them a text message or email to see if they are OK. A bit of reassurance goes a long way.
If your tenants are in a high-risk category, be mindful that they will be self-isolating for a while. Since they may not have family and friends to keep them stocked up with essentials, touch base with them to see if they need anything, such as groceries or medication. The government is putting plans in place to ensure vulnerable people have essentials, but landlords can still do their bit too.
Plan Ahead
Many landlords will need to tighten their belts over the coming weeks and months. Coronavirus may or may not affect your buy to let business, but it’s a good idea to carry out a risk assessment. Think carefully about any areas of vulnerability, such as mortgage payments, have a plan in place to mitigate problems. Stress test the impact of rent arrears and see how long you can last with no rent coming in. Assess your cash reserves. How long will they last?
Remember, we all have a moral duty to help each other during this crisis. Be kind, be thoughtful, and above all else, help those that need help. Stay safe and look after your family. Netflix and Amazon Prime have tons of excellent movies and boxsets right now!
