My residential tenant is in rent arrears as a result of COVID -19 – What can I do?
Tenants continue to have a liability to pay their rent and abide by all of the other terms of their tenancy agreements.
Unfortunately, if your tenant gets into rent arrears and you are considering taking possession proceedings against them, any notice you serve, following the implementation of the Coronavirus Act 2020 on 26 March 2020, must provide them with three months’ notice.
Previously if two months’ rent was outstanding you could serve a notice and commence proceedings 14 days after the tenant was deemed to have been served with the notice.
In respect of possession proceedings, following a direction from the head of the judiciary, all new or ongoing housing possession actions are suspended for an initial period of 90 days.
If you have previously issued a notice seeking possession due to rent arrears before the Act came into force on 26 March 2020, you can still issue proceedings relying on the shorter notice period but the Court will automatically suspend the proceedings for 90 days. At present courts are not listing any possession hearings.
The Government’s guidance in https://www.gov.uk/government/publications/covid-19-and-renting-guidance-for-landlords-tenants-and-local-authorities is that landlords should not serve new notices seeking possession during this challenging time unless they have very good reason to do so. The Government suggests that landlords and tenant attempt to agree a plan if tenants are struggling to pay their rent; i.e.
- A temporary agreement not to seek possession action for a period of time and instead agree to accept a lower level of rent for the lockdown period;
- Or agree a plan to pay off arrears at a later date.
Tenants might also be able to apply to their local authority for support if there are experiencing financial hardship.
My tenant is complaining about disrepair at the property, do I still have to carry out repairs?
According to the Government’s guidance (see link above) issued on 26 March 2020, landlords repair obligations have not changed. Although it is appreciated that planned inspections may be more difficult the Government expects landlords to still obligation with their obligations to prevent dangerous living conditions.
This means that you are still liable to carry out repairs and the tenant could accrue damages if there are delays in carrying out works. The Government suggests tenants and landlords adopt a common-sense approach to dealing with non-urgent issues which are affected by COVID-19 related restrictions.
Landlords should still attend to urgent health and safety issues during the lockdown, according to the guidance, these include the following:
- A problem with the fabric of the building, for example the roof is leaking.
- The boiler is broken so that the tenant is without heating or hot water.
- If there is a plumbing issue meaning that the tenant does not have washing or toilet facilities.
- If white goods such as fridge or washing machine have broken meaning the tenant is unable to wash clothes or store food safely.
- If there is a security critical problem, such as a broken window or external door.
- If equipment a disabled person relies on requires installation or repair.
My tenant has moved out of my rental property as a result of the COVID-19 and I have agreed to end their tenancy, what should I do with their belongings?
Legally you cannot dispose of someone’s belongings if they have moved out of your rental property. Instead you become an “involuntary bailee”. This means that you have a duty to do what is “right and reasonable” with the goods. If you destroy their possessions, you will be opening yourself up to a claim in damages. Normally it would be appropriate to serve a Notice under the Torts (Interference with Goods) Act 1977 on the tenant giving them a reasonable opportunity to retrieve their goods, i.e. 14 days otherwise they would be disposed of. However, given the current circumstances, if the former tenant is self-isolating for health reasons, or they are a key worker, or they are having difficulties arranging for transport to remove their belongings because only essential travel is allowed, courts are unlikely to consider that 14 days is a reasonable period to retrieve belongings. Therefore it is advisable to try to see if you can reach an agreement with the tenant allowing them an extended period in which they can retrieve their possessions or agreeing with them to place the items in storage at their expense if this is not practicable.
Can I argue that my lease has been frustrated as a result of the COVID-19?
The Courts are currently unlikely to recognise COVID-19 as a frustrating event. Generally, frustration is extremely difficult to argue in Court because a temporary inference does not remove “all or substantially all of the benefit that one party receives from the contract”.
There are two recent relevant cases:
In Canary Wharf v European Medicines Agency (EMA) [2019] EWHC 335 (Ch) the High Court held that Brexit was not a frustrating event when the European Medicine Agencies tried to get out of their 25 year lease with Canary Wharf. The Court held that the frustrating event must be so fundamental that it goes to the root of the lease and renders further performance of the lease impossible, illegal or makes it radically different from that contemplated by the terms of the lease.
Whilst in Li Ching Wing v Xuan YiXiong [2003] HKDC 54 a Hong Kong case relating to the 2003 SARS outbreak, the Court held that a lockdown of 10 days was relatively insignificant in the context of a two-year tenancy agreement and therefore the tenancy had not been frustrated. Even though the current lockdown has been extended for a further three weeks, a lockdown of 6 weeks in the context of a five-year lease is unlikely to be considered a frustrating event. But in the case of a short term lease for a month, it might be possible to argue frustration.
My commercial tenant is in rent arrears as a result of the COVID -19 – What are my options?
There is currently a temporary ban on forfeiture of commercial leases for non-payment of rent. This ban is currently in force until 30 June 2020, but the Government might decide to extend it. However, this does not create any waiver of the landlord’s right to forfeit for non-payment of unpaid rent in future.
Originally statutory demands and winding up petitions were available but this is no longer the case. From 27 April 2020, the government will temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from 27 April 2020 to 30 June, where a company cannot pay its bills due to coronavirus.
In addition the government is in the process of introducing legislation to prevent landlords from using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.
How it appears that Pursuing Guarantors under Authorised Guarantor Agreements (AGAs) is still any option.
The government's announcement regarding regarding these measures can be found on this link https://www.gov.uk/government/news/new-measures-to-protect-uk-high-street-from-aggressive-rent-collection-and-closure
Can I still apply for a lease extension/start the process to enfranchise my property during lockdown and the Coronavirus/COVID -19?
The simple answer is yes, but only if both the landlord’s and tenant’s solicitors voluntarily agree to service of notices by email. The Association of Leasehold Enfranchisement Practitioners (ALEP) has developed a voluntary “Protocol for the Service of Initial Notices and Counter- Notices During COVID-19 Pandemic”:
However, neither the Coronavirus Act 2020 nor the Health Protection (Coronavirus Restrictions) (England) Regulations 2020 include any provisions extending the time limits under leasehold enfranchisement legislation and parties must therefore adhere to existing deadlines.