Coronavirus – protecting your home and the help available
Having somewhere safe and secure to live and now to self isolate is a basic human need. It seems inevitable that the virus and the necessary central government responses to it will impact negatively on the economy and people’s income. This of course could impact upon people’s ability to pay rent and mortgages, potentially putting people’s homes at risk.
Before Wednesday’s announcement there was no real legal protection for those unable to pay their rent. The only saving grace for tenants was that under the Protection from Eviction Act, residential occupiers cannot be evicted without a court order, which in normal circumstances can take 4-6 months to obtain. Even then the court can order a further delay of 6 weeks in the case of hardship.
Landlord associations in recognition of the severity of the current situation had been advising member landlords to allow rent to be paid at a later date assuming the tenant had a good payment history. Additionally they were asking government and mortgage lenders for a package of measures to protect their business and income.
On Wednesday the Government announced a radical package of measures to protect renters and landlords affected by coronavirus. As a result, no renter in either social or private accommodation will be forced out of their home during this difficult time. Emergency legislation will be taken forward as an urgent priority so that landlords will not be able to start proceedings to evict tenants for at least a three-month period. In addition, no new possession proceedings through applications to the court, are to start during this period.
Recognising the financial impact this will also have on landlords, if tenants cannot pay their rent and cannot be evicted, a three month mortgage payment holiday has also been announced which will extend to landlords whose tenants are experiencing financial difficulties.
Home owners and residential buy-to-let landlords
As with rented properties, mortgage providers need to apply to the court for a possession order before a home can be re-possessed and again this usually takes several months.
In recognition of the difficulties that home owners might face and responding to statements made by the Chancellor, Mortgage lenders will now offer homeowners a mortgage payment holiday of up to three months, but as is always the case, they recommend customers concerned about their financial situation should speak to their lender as soon possible.
Furthermore on Wednesday UK Finance who represent lenders announced:
“Mortgage lenders are extending the same support to buy-to-let landlords who have tenants experiencing issues with their finances as a result of COVID-19 and the options include a payment holiday of up to three months.”
“For those customers already experiencing financial difficulty, lenders have also agreed a three-month moratorium on residential and buy-to-let possession action. The industry wants to reassure customers that they will not have their homes repossessed at this difficult time and therefore, these measures will start from tomorrow (19 March 2020).”
Issues facing those currently buying or selling property
Our residential real estate team are currently dealing with unique issues arising due to potential self isolation of either the buyer or seller on or around the day of completion.
Once contracts have been exchanged, the parties are contractually bound to complete on the agreed completion date. If you contract the virus, and have to self-isolate, and cannot complete as a result, you will be in breach of contract. The implications of this are that you would be liable for interest for late completion, or possibly lose your deposit if you could not complete at all, along with other costs which ‘flow’ from the breach.
Simultaneous transactions i.e. exchange and complete on the same day with no time delay, would remove the possibility of one of the parties contracting Covid-19 before completion and allow the purchase to go ahead but simultaneous transactions leave all parties involved vulnerable, with no guarantees until the last minute. Therefore, this is not a fool proof solution.
Some lawyers have been looking at inserting “Coronavirus clauses” into contracts, in our view, this is not a viable option and this could lead to more confusion, disappointment and unhappiness.
Because the situation is changing rapidly then so will our advice. Rest assured though that we will continue to have our ‘finger on the pulse’ and to respond in your best interests promptly and proactively. We will continue to advise you on your transaction based on the best possible information available at the time.
Those living in leasehold properties with leases near 80 years or less
The situation has not changed and the clock continues to tick for those living in Leasehold properties where an extension of the lease term is strongly advised in order to protect the value of the property. As we have previously advised those in this situation should seek legal advice now.
If you require any further advice in relation to any of the above issues please do not hesitate to contact Yezdan Izzet in our Real Estate Litigation team on 020 7288 4737 or email at YezdanIzzet@boltburdon.co.uk. All of our lawyers are working from home and from an operational point of view it is very much business as usual.