Home-owners facing financial difficulties due to the consequences of the spread of the coronavirus will be offered a three month mortgage ‘holiday’.
The Chancellor’s announcement during the coronavirus briefing yesterday came as part of a large financial package to keep the economy running. This mortgage ‘holiday’ is designed to help those who cannot work because they may, for example, be self-isolating or on zero hours contract and are consequently not earning any or enough money to pay for all that is required at this difficult time.
It is important to note that this ‘holiday’ is simply that. This means that the mortgage arrears will need to be cleared at some point to avoid any penalty and interest charges. Interest will however continue to accrue during the payment holiday. It is possible that some may be given more time to pay however, given the announcement was made yesterday details are quite sparse and mortgage companies will no doubt have their own plans in place too.
What is interesting is that this announcement did not include anything directed at those who rent. The private rental market is also going to be impacted, especially for those on a low income. Therefore, tenants will no doubt be somewhat aggrieved by this. Similarly, the mortgage holiday arrangement is restricted to homeowners and is not available to landlords, although individual banks might choose to offer something. Whilst the government is no doubt happy to discuss payment holidays with big banks it cannot easily force landlords to make similar arrangements with their tenants.
The options for landlords that are contacted by tenants struggling to pay their rent is therefore:
- To do nothing;
- To contact your buy-to-let lender and request a mortgage ‘holiday’ because the tenant is currently unable to pay their rent. However, they are not obliged to offer anything;
- To reach an agreement with your tenant for them to pay less or a small proportion of rent for a few months. Once the tenant begins working again the parties could reach a further agreement to clear the arrears.
This is a difficult time and landlords are of course entitled to pursue tenants in court for rent arrears. However, to serve notices and obtain possession on mandatory grounds the tenant will need to have accumulated 2-months rent arrears. Further, the courts, whilst still open at present may not be so for much longer but where they are, if staff numbers are low, possession cases may take longer to be heard.
At this current time possession proceedings are probably the last thing that landlords should consider. An agreement with the tenant is certainly the best option because if you do have your current tenant evicted there is no guarantee that a new tenant will be secured within a reasonable period.
Labour has written to the government promoting the idea of a rent ‘holiday’. Furthermore, the Chancellor stated during his briefing to Parliament that the Secretary of State for MHCLG, Robert Jenrick, would make an announcement in the next few days. If any progress is made on this we will update this post.
The contents of this blog post is not legal advice and is provided for general information purposes only. If legal advice is needed readers should contact a solicitor. No responsibility for any information contained within this post is accepted and PainSmith solicitors accepts no liability in respect of the contents or for action taken based on this post.