Ticking bomb…for residential tenants and landlords
As the Government introduces steps to re-open the economy after lockdown, a storm cloud looms for residential landlords and tenants.
The Coronavirus Act 2020 legislation, which came into force on 26 March imposed a 90 day stay on most possession proceedings, and on the enforcement of existing orders for possession.
In England, at the time of writing, there is no indication that this period of stay will be extended (although the legislation does allow for this possibility).
There are many landlords waiting to start or continue the process of obtaining possession. What will be the economic and social effects that follow?
For example, a couple with a baby rent a 1 bedroom flat. Both lose their jobs and as a consequence, they are unable to keep up with their rent payments. Their landlord takes steps to obtain possession. What will their options be?
In these circumstances it is likely that the couple would be assessed by the local authority as being unintentionally homeless, and a priority need as defined under the Housing Act 1996. In more normal times it is fairly likely that they would be re-housed within a relatively short period of time. But what will happen if unemployment reaches levels not experienced since the 1980s? There may be very many thousands of people in a similar position who would be considered to be priority cases.
In the 1980s there were considerably higher levels of local authority housing stock. So, are we now looking at hitherto unseen levels of homelessness?
For landlords, the issue is more economic than existential. With high levels of unemployment on the horizon, the question of the affordability of rents will come into focus. Will rents have to be reduced to keep properties let? And what will this mean for landlords who are heavily leveraged with mortgage finance? Will mortgage lenders begin to exercise their powers of sale?
We shall soon find out whether the stay will be extended. If it is not, then before too long – as with the imminent end of the Furlough Scheme – we will begin to get a sense of the long-term effects of the Covid Pandemic on this particular part of the economy.
To discuss a property dispute that you may need assistance with, please get in touch with Paul Harrington.