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Here at Cedar House our clients include both renters and landlords, and the present COVID-19 pandemic and lockdown have affected all parties. Understandably, renters wish to know that they will have a secure place of shelter, especially during any period of enforced social isolation. This has been an important factor behind the UK government’s decision to ban forced evictions until the 25th of June (now extended another two month) whilst the country navigated its way through the crisis.
Yet many landlords are also feeling financial pressure due to tenants refusing to pay rent. Some have even been left temporarily without a home after being forced to return to the UK after living overseas, yet tenants have not vacated the property they were letting out. With so many competing pressures and constant change in both the pandemic and government policy, how can renters and landlords navigate these kinds of financial pressures?
Here, our financial advisers offer some thoughts in July 2020 as the extended rental eviction ban deadline approaches. We hope you find this content helpful. Please contact our financial advice team here at Cedar House for more information or to access personalised advice:
020 8366 4400 or enquiries@cedarhfs.co.uk
What will happen to renters?
The UK is currently in unchartered legal territory with so many renters currently inhabiting property which they cannot be turfed out from. Yet the present eviction ban will not continue indefinitely, even if it is extended another time. Tenants currently have no right to “rent holidays” in a similar way to homeowners, who can request up to 3 months’ mortgage holiday if they are unable to pay their mortgage due to financial hardship caused by COVID-19. Tenants are unlikely to get access to a similar scheme, especially now that the UK government is facing pressure to address the public debt which has soared since the March 2020 budget handouts.
Renters are more likely to be on short-term contracts and these might be terminated once the UK’s job retention scheme is wound down (possibly in the autumn of 2020). If this occurs, then many renters will naturally be forced to look for other work which may be scarce in the current economic environment. There is some financial support for renters which has recently been announced by the government; a £1bn package which will allow renters to access additional benefits via housing benefit and Universal Credit to help cover their monthly rent. Landlords also now have access to mortgage holidays, which might open up more flexibility for tenants to agree to a short-term reduction in monthly rent payments.
What will happen to landlords?
At the time of writing there are at least 2,400 eviction court cases waiting to be heard, many of which are due to disputes over rent during the COVID-19 lockdown. Some of these cases could drag into 2021, with some landlords facing a huge drop in rental income which could destabilise their finances. At present, at least £3m of arrears has been built up since March 2020, and the average revenue lost from rent (per property) is about £1,250. Those with properties in London, of course, are likely to have been hit even more badly due to the higher rent involved.
This is partly the reason why landlords have now also been extended mortgage holidays by the government, if needed. For retired people (i.e. typically smaller landlords) who are using property to fund their lifestyles, the financial pressure from reduced/absent rent will likely introduce a huge strain on monthly income. If you find yourself in this position, we suggest speaking with a financial adviser about the best options for mitigating your risks and exploring options for opening up new income streams.
It’s important to be realistic about the situation many landlords find themselves in. Due to the huge backlog of cases (which is building), it is quite possible that many property owners could be waiting up to 12 months before they can claim possession. There are no easy solutions for landlords currently dealing with tenants refusing to pay their rent, who are being a nuisance to neighbours or who have overstayed their lease. At Cedar House, we cannot advise on your legal options in July as financial advisers. Yet we may be able to help you navigate the complex financial planning implications that these kinds of situations might have thrown up for you.
Invitation
This article was written in July 2020 in the midst of an extension to the government’s eviction ban. As the situation with COVID-19 develops and UK policy morphs to counteract the virus, it’s important for both landlords and renters to keep abreast of important developments which may affect their financial security and future. Here at Cedar House, our financial advisers are here to help you explore your best options using the most up to date information.
If you would like to discuss your financial plan with a member of our team, then get in touch today to arrange a free consultation:
020 8366 4400 or enquiries@cedarhfs.co.uk.