In a fast-changing residential market emergency legislation has now been given Royal Assent in the form of the Coronavirus Act 2020 with the intention that tenants should not, during the peak period of the virus, be evicted and made homeless.
Established court processes must be followed by a landlord and it remains the case that a landlord needs to give a tenant the appropriate notice of termination and obtain a court order giving them possession of the property.
Obtaining a court order in the current countrywide lockdown has been a patchy process and while the civil courts remain open, many hearings have been postponed or adjourned. It may be that more use can be made by the civil courts of phone or video hearings, but this is likely to depend on what court facilities are available and what court staff remain working in particular courts.
Suspension of Possession Proceedings
A Government initiative has been progressed whereby a party who has been drawn into arrears owing to circumstances outside of their control (for example the COVID-19 lockdown prevents them from generating an income) will receive further protection from eviction, and the Master of the Rolls with the Lord Chancellor’s agreement made the decision to suspend all housing possession proceedings for ninety days from the 27th March 2020.
Guidance from the Ministry of Housing, Communities and Local Government states that neither housing cases in, or about to go into the court system can progress to eviction, with the effect that no further possession orders will be made until the end of June 2020.
The suspension (which may yet be extended) applies not only to tenants but also to licence holders covered by the Protection from Eviction Act 1977 and those people with mortgages. The suspension is now embodied in the new Practice Direction 51Z of the Civil Procedure Rules.
The effects of the main provisions found in Schedule 29 of the Coronavirus Act 2020, Residential Tenancies in England and Wales: protection from eviction are:
- From 26th March 2020 to 30th September 2020, notices given by landlords to tenants seeking to bring a tenancy to an end must be of a minimum of three months before possession proceedings can be commenced.
- The provisions notably relate to assured shorthold tenancies (ASTs), the majority of which will have private landlords, but also to assured, secure, protected, introductory, and demoted tenancies.
- The prescribed forms of notice have been changed in order to inform tenants receiving the notices of the legislative changes and the new time periods.
- Power is reserved to the Secretary of State to extend the current three-month notice period up to six months.
What practical steps can be taken
Agreed Payment Holiday
A starting point for both landlords and tenants when a tenant is experiencing financial difficulty, and an inability to meet monthly rental payments, is to try to reach an agreement on either a rent reduction or deferment of rental payments. It is important, for the protection of both parties, that any terms agreed are clear, unequivocal and in writing. The simple suspension of possession proceedings at this stage does not mean that any contractual liability simply disappears.
Many buy to let landlords will be concerned that a rent holiday will impact their ability to meet their mortgage payments, however it may be possible to obtain mortgage payment holidays for this period from their lenders; again the terms of any payment holiday should be agreed. However, if no agreement is possible, the Coronavirus Act 2020 from 26th March 2020 will intervene in the event the lender should try to obtain possession of your property.
It is worth noting that the provisions do not apply to either residential licences or contractual tenancies (the latter will often arise where the tenant is a company or the rent paid is too great to fall within the statutory framework (currently in excess of £100,000 per annum)) although the current suspension of court proceedings mitigates the limitations of the legislation.
Termination of the Agreement
Many tenants will also want to know if they can terminate their tenancy agreements early for reasons of sickness or needs of family members. Generally, fixed term tenancy agreements can only be terminated within the initial fixed term of the tenancy by invoking a break clause (if there is one) or again by negotiation with a landlord – failing which the tenant could be liable for damages up to the conclusion of the fixed term subject to how quickly a landlord can locate and contract with a new tenant for at least the same contractual rent – in the current climate that could be a long time.
For tenants that have stayed in the property after the expiry of a fixed term, a periodic tenancy may have arisen (often a weekly or monthly tenancy depending on when rent is paid). Exiting such periodic tenancies by a tenant is likely to be a straightforward process, but they will still need to consider the contractual formalities for the preparation and service of any notice.
One practical consequence for landlords of the extended notice period is that they should be careful to draft compliant notices that meet both the pre-existing and new requirements imposed by the Coronavirus Act 2020. To do otherwise may result in defective notices only being discovered at the possession hearing and another three months being required to re-serve a compliant notice, plus costs incurred which become non-recoverable. Notices validly served before 26th March 2020 can still be relied upon, although may not be capable of enforcements owing to the stay of possession Orders and / or if the current period for non-eviction is extended.
Landlord’s should also be careful not to waive the requirement to pay rent in any discussions or written agreements to defer, or reduce, at this time the liability to pay rent. Without Prejudice discussions between the parties may be better reduced to writing once heads of terms have been agreed, and may be assisted by the involvement of landlord & tenant professionals who will be alert to the potential pitfalls which may not have been fully appreciated by the parties.
The property litigation solicitors at Bishop and Sewell can advise on all aspects of both the existing legislation relating to possession applications along with the new provisions of the Coronavirus Act 2020, and can assist in negotiations between landlords and tenants.
The above is accurate as at 02 April 2020. The information above may be subject to change during these ever-changing times.
The content of this note should not be considered legal advice and each matter should be considered on a case by case basis.