Effects of COVID-19 on Residential Possession Proceedings

So the much anticipated Coronavirus Bill became law on 25 March 2020 (now called the Coronavirus Act 2020) and despite the hype about the government introducing a complete ban on evictions for 3 months and additional protection for renters affected by coronavirus, the final law is significantly watered down.

Perhaps the most significant change is the requirement that the landlords are now required to give tenants 3 months’ notice if they intend to seek possession before they can issue possession proceedings. This change in the law only applies to ‘tenants’ and covers possession of tenancies under the Rent Act 1977, Housing Act 1985, Housing Act 1996 and Housing Act 1988.

Most private tenancies these days are subject to the Housing Act 1988. This means that ALL eviction notices served on the tenants, be it under s.21 or s.8 of the Housing Act 1988, must now be for a minimum period of 3 months (regardless of whichever ground is being relied on under s.8 ). This change in the law applies from 26 March 2020 and is presently set to apply till 30 September 2020, called “the relevant period”, with the relevant government departments having the power to extend both the 3 months’ notice period to a maximum 6 months and equally to extend the end date of 30 September 2020.

The change of course will not be welcome news for landlords who are already struggling with tenants in significant arrears. Previously, the landlords could simply rely on a 2 week s.8 notice before they could issue possession proceedings, now this notice period has been extended to a minimum 3 months.

It is also important to remember that this change in the law only applies to any new notices, notices already given are unaffected. Equally, the new law does not apply to licences (including lodgers). So does this mean that landlords can therefore proceed on these older notices, or that a licensor can proceed against a licensee as normal? Well, not really.

As of 27 March 2020 the courts are also suspending all ongoing housing possession actions for a period of 90 days, with a possibility of extending this moratorium.

The practical effect of this is that not only will landlords have to give longer notices within “the relevant period”, but any housing possession proceedings already in the courts will also be adjourned to a period at least after 25 June 2020. This will also impact licensors intending to evict their licensee.

It appears that material changes in the law have been introduced to protect those who rent from being prejudiced by the adverse effects of a shrinking economy and job losses, however, at the same time the government is also keep to strike a balance to offset the hardship faced by the landlords in terms of delay in getting their properties back.

With a view to alleviate these financial burdens measures have been introduced that will help both the tenants and the landlords to offset the impact so that the problems are not pushed up the chain to other actors.

Some of these measures are listed below, but given that this is a live and fast moving situation, others benefits may also be available shortly.

Support for the tenants

  1. If the tenant is employed – an employer can access grants for up to 80% of the employee’s wages. Perhaps the tenant can negotiate an equivalent reduction in rent accordingly;
  2. There are similar measures available for self-employed tenants;
  3. Universal Credits and Working Tax Credits can be claimed;
  4. Local authorities have received emergency funding so discretionary housing payments can be made if appropriate;

Support for landlords

  1. Mortgage lenders have announced that they will be giving out ‘mortgage holidays’ for 3 months and that they will not be applying for repossession for 3 months starting 19 March 2020. Any unpaid repayments could then be deferred to the end of the term or spread across the remainder of the term. This may help landlords who face having to make mortgage payments whilst faced with the prospect of limited or no rent coming in;
  2. Possibility of direct cash grant of 80% of profits, up to £2,500 a month;
  3. Landlords should also remember that housing element payments of the Universal Credits can also be paid direct to the landlord provided the tenants are in over 2 months of arrears. Landlords are encouraged to liaise with their tenants and speak to the local authority.

Just because the duration of the eviction notices has been extended or that ongoing housing possession proceedings have been suspended does not mean that the tenants are entitled to an automatic “rent holiday”. Tenants who can pay rent should continue to do so. Any tenants facing problems keeping up with the rental payments should speak to their landlords to find a sensible solution. Landlords are equally advised to be sensitive during this time. Simply put, if the tenant stops paying there is hardly anything they can do except to issue a notice (i.e. wait 3 months) and then apply to the court, this is of course provided the courts have lifted the suspension on housing possession proceedings by then. Under the current climate, it may therefore be sensible to try and reach an interim compromise with the tenants to ensure that at least some money continues coming in in the form of rent. This ‘compromise’ could be agreed by way of a ‘without prejudice’ discussion between the parties, the terms of which can then be formalised, if necessary, after seeking advice from a legal professional. Landlords are, however, advised to make clear to the tenants that any such compromise arrangement is only temporary and that any outstanding rent must then be paid once the situation normalises.

Readers are advised to note that this is a very fast moving situation and there are plenty of issues that are either under discussion or that still need to be addressed in legislation.  The government is also intending to introduce a new pre-action protocol for possession claims (similar to the one for social landlords), no time line as yet been given.

For more up to date progress on these issues – watch this space.

(correct at the time of writing – 27 March 2020)