As part of the series of reforms relating to the coronavirus pandemic, the Government has announced a number of temporary measures relating to the PRS. Most of these relate to restricting the ability of landlords to repossess their property for the duration of the emergency.
However, to ensure that landlords can temporarily absorb rent arrears if tenants lose their job or have a reduced income due to coronavirus measures, the Government has agreed with lenders that buy to let landlords will be able to claim up to three months of 'mortgage holiday' in situations where their rental income has been impacted by the coronavirus.
What is our position on this?
The NLA and RLA welcome the Government’s work to agree a mortgage holiday for affected landlords with buy to let lenders, but they must go further to protect tenants’ incomes and reduce the impact on individual landlords.
We are calling for the Government to -
- Protect tenants’ incomes. People who may have sadly lost their jobs or had a big cut in income need support to ensure they have enough to live off. As such we are calling for a temporary halt to the 5 weeks waiting period for the first instalment of Universal Credit to be paid.
- Reduce the burden on landlords, in line with other businesses by pausing the final phase on removing mortgage interest relief above the basic rate of income tax.
What is a mortgage holiday?
As part of the Government’s response to the coronavirus emergency, lenders have agreed to allow people with buy to let mortgages to apply for a three-month mortgage holiday.
For the duration of this period you will not have to make your scheduled mortgage payments. However, interest will continue to accrue and as a result you should expect to make higher payments afterwards.
My tenant has been affected by the coronavirus. What should I do?
UK Finance recommend you contact your lender to discuss your options as soon as possible.
What are the criteria for applying for the mortgage holiday?
For buy to let landlords the key requirement is that their tenant must have been directly or indirectly affected by the coronavirus.
The second essential requirement is that you must be up to date on your current mortgage payments.
I was experiencing financial difficulties prior to the coronavirus impact will I qualify for the holiday?
Mortgage holidays are only available to people who are up to date with their payments.
However, from 19th March 2020 mortgage lenders have agreed to suspend all possession orders and not start any new court actions for 90 days.
How do I establish my tenant has been impacted by coronavirus?
Mortgage lenders have agreed that landlords may contact their lender to self-certify that their tenant has been impacted. This done on the understanding this mortgage holiday will be passed down to their tenants.
What happens at the end of the mortgage holiday?
While payments are suspended for the duration of the mortgage holiday interest will continue to accrue on the mortgage and those mortgage payments will eventually have to be made up. Your mortgage lender will be able to discuss options with you to help repay the additional interest accrued.
Will my credit rating be affected if I take the mortgage holiday?
UK Finance have confirmed that 'firms will make every effort to ensure that the payment holiday does not negatively impact on your credit file.'
Will my rent insurance provide cover during this period?
You should contact your insurance provider as you may not be covered for this specific situation.
What financial support is available to landlords other than a mortgage holiday?
It is unclear if any other support options will be made available to landlords at this time. The RLA and NLA have reached out to the Government on this point.
Are all tenants entitled to a rent holiday over the next three months?
No. Those unaffected by the coronavirus should continue to pay rent as normal. Similarly, tenants who can still afford to pay their rent after their circumstances change should also be encouraged to pay their full rent as normal.
Ultimately, any rent that is deferred during this period will still be expected to be paid back later as part of a payment arrangement. To avoid potentially unmanageable living costs in the future, tenants should be encouraged to pay their rent if they can afford it, and landlords should provide them with support in applying for assistance where it may be available.
Should I be contacting my tenants at this time?
It is sensible to be proactive in this situation. Contact your tenants without physically meeting with them. You should use this opportunity to discuss their financial circumstances, whether they are employed or self-employed, and whether they are likely to have to self-isolate.
If they are likely to struggle in paying the rent, you may be able to assist them with guidance or you may discover that you should apply for a mortgage holiday.
My tenant has asked me to surrender the tenancy early as they are experiencing financial difficulties due to the coronavirus. Should I accept surrender?
This will depend on your own circumstances, but it is likely to be difficult to find replacement tenants in the next few months. You should consider whether it would be better to work with the tenant to arrange a payment plan or try and assist them with applying for benefits before accepting their offer to surrender.
What financial assistance is available for employees who are affected by the coronavirus?
The landlord may offer a rent reduction or a rent deferral to tenants affected by the coronavirus.
In addition, employers can access a grant from HMRC that covers 80% of salary (up to a maximum of £2,500 a month) for each employee to ensure their job is retained. This Coronavirus Job Retention Scheme offers the grants on the proviso the employer does not make them redundant.
This scheme is understood to be backdated so that employees recently made redundant may be rehired and covered by the scheme. Tenants who have recently been made redundant should be encouraged to contact their former employer to see if they will be taking up this grant.
Where a tenant is unable to work due to sickness or self-isolation, they are entitled to statutory sick pay if they qualify for it, or the sick pay their terms of employment offer above that amount.
What financial assistance is available for self-employed tenants?
Self-employed tenants may apply for a taxable grant equivalent to £2500 per month or 80% of their monthly profits averaged over the last three years (whichever is lower). This will be paid in one lump sum to cover a three month period.
HMRC will contact eligible self-employed people to give them guidance on how to apply.
This payment is likely to be received in June so you may wish to arrange a mortgage and rent holiday to cope with the time period. Alternatively, self-employed people can also apply for full Universal Credit payments if they qualify.
My tenant does not benefit from the Coronavirus Job Retention Scheme. Where should they go?
Your tenant should apply for Universal Credit at https://www.gov.uk/universal-credit.
Where it is not possible to apply digitally, they can apply by calling -
Universal Credit helpline: 0800 328 5644
Welsh language: 0800 328 1744
Are there any plans to reduce the wait time for Universal Credit claims?
No reductions in wait times have been announced at this time. The NLA and RLA are pressing the Government to reduce the wait times to ensure that landlords and tenants remain financially secure.
Where else should I advise my tenant to go for financial support?
Tenants should be encouraged to speak their local authority for a discretionary housing payment. Alternatively, they may seek an advanced payment on their Universal Credit by contacting the DWP on the Universal Credit helpline.
My tenants are concerned about paying their utility bills. What can be done to assist them?
Advise your tenant to contact their energy supplier. A number of emergency measures have been put in place to ensure that vulnerable tenants will not have their utilities suspended during this period.
Will there be any council tax relief during this period?
Local authorities are being provided with a £500 million emergency fund, the bulk of which is intended to be targeted at council tax relief.