Everyone knows how the Covid-19 outbreak is a game-changer in many respects, including the management of properties.
Therefore, here is our overview and go-to-guide on the matter.
Whether a tenant now not able to pay bills, landlords having rental and value losses, or property advisors stuck in the middle.
The official government Covid-19 guidance for landlords and tenants can be found here, and the main piece of legislation passed by the government in March on a general not just property basis is the Coronavirus Act 2020 (and associated practice direction). Plus, HSE advice here, and NHS here.
Plus, the RICS (Royal Institution of Chartered Surveyors) have guidance here, ARMA (Association of Residential Managing Agents) have help here, and the government is working on formal guidance as well.
On the sales and lettings side, residential estate agents, house movers, and conveyancers are now able to begin business again in an effort to kick-start the housing market, through the The Health and Protection (Coronavirus, Restrictions)(England) (Amendment)(No. 2) Regulations 2020.
It's also worth noting any variations for matters in Wales, Scotland, and Northern Ireland accross the UK and comparable legislation like the Coronvirus (Scotland) Act 2020 and Health Protection (Coronavirus Restrictions) (Wales) Regulations 2020. A key difference is the how far each region is coming out of lock-down.
We’re keeping it as general as possible in order to try and cover everything for everyone - from landlords and tenants, to residential and commercial.
We’re also keeping it updated, with the last time of amendment at the top of this post, with things evolving almost daily as people begin to slowly digest the consequences.
And we will also link to more detailed resources through out and other helpful websites to enable you to delve deeper when needed.
1. Taxes & Business Support
This doesn’t directly affect the property, but by a business taking advantage of these, it takes takes the pressure off other property costs like rent.
Therefore, it is actually the first thing to look at, and noting which business types must have ceased trade by law as opposed to others which understandably choose to (i.e. restaurants, museums, galleries, bars and theatres, under the Health Protection (Coronavirus, Business Closure) (England) Regulations 2020).
A big one here is the government covering 80% of people’s income up to a £2,500 per month cap, as employees or self-employed people (Job Retention Scheme & Furlough Leave).
In short, if they can still keep people in the business but have salaries covered, even if they are at home and not working, then this is a huge pressure off outgoing costs. Although back-dated from the start of March, this will take time to process.
Self Assessment Tax Returns and mid-year payments have also been delayed until January 2021.
The gist is to delay paying taxes and free up cash in the business now.
On a wider scale, there is a new Coronavirus Business Interruption Loan Scheme where the government is guaranteeing debt so that lenders can still provide loans for those with more risky credit ratings via the British Business Bank.
Plus, the government has announced Bounce Back loans for small businesses up to £50,000 and sensible interest rates and initial delayed repayments.
The Bank of England also has a new lending facility to help with liquidity in much larger firms.
For people in their own homes that are struggling, there is help with Housing Benefit and Universal Credits.
Also on a personal level, loans and credit card providers are looking at payment holidays, lower monthly payments, and no late-payment penalty fees.
This is all about helping extend and accommodate debt to again help businesses and individuals with cash flow through the next few months.
The more this is done, the more help to cover direct property costs and issues.
2. Business Rates
If a business is vacating the property then they may be able to apply as usual anyway for 3 months void relief from rates even though a lease is still in existence.
The government is also helping businesses save money in various ways through business rates.
Firstly, certain businesses have this year’s business rates written off from April 2020, but with an upper limit for those with many locations and high liabilities – retail, leisure, hospitality, and then later nurseries and estate agents.
Secondly, if they qualify for Small Business Rates Relief or Rural Rates Relief and therefore no or little rates being paid anyway, they can apply for up to a £10,000 grant to help with general business expenses.
And third, the next business rates revaluation date has been postponed from 2021 to 2022 for a longer term benefit.
If businesses are still paying rates, then look at other ways to mitigate this (landlords may also want to be involved to help ensure cash then for rent payments and dealing with any void costs or inclusion within all-inclusive rental agreements).
Even if you still have to pay as maybe an office or workshop occupier, still contact your local billing authority for discretionary help, after all an additional £617m was distributed to them at the start of May to help with cases. Claim empty rates relief for at least the formal government lock-down period where you were not alllowed to occupy/trade by law, and apply for a material change of circumstances.
At the moment there is no proposed relief for Council Tax at residential properties.
3. Rents & Ending Leases
This is of course a huge issue, whether you’re a tenant needing to pay rent, or a landlord having to receive in order to then pay funders (here's a heart-warming story of a helpful landlord).
This is the part that is still fixed in a lease and therefore due, with no government intervention – bad news for a tenant, possibly good for a landlord.
However, the government is slowly getting involved, with landlords not able to take action on evicting private residential tenants through Schedule 29 of the Coronavirus Act 2020. There is a three months notice period now under the usual Section 8 and 21 grounds under the Housing Act 1988, the Housing Act 1985, and Notices to Quit under the rent Act 1977 - this is now extended to the end of August.
Also, for business leases, a landlord won’t be able to forfeit the lease for three months until the end of June through the moratorium in Section 82 of the Coronavirus Act 2020. This covers both re-entry and court proceedings, for all business leases under the Landlord & Tenant Act 1954 including other sub tenants and legal occupiers. However, this is only for rent (and other monies) arrears, with action still possible from July. This might also relate to other general legal action by a landlord such as dealing with trespassers as suggested here.
The government is also looking to restrict the use of statutory demands, winding-up petitions, and Commercial Rent Arrears Recovery (CRAR) for commercial leases, although watch for when this actually becomes law and then what periods if covers.
Although there can be talk of clauses and rights under leases to end them and the obligation to pay rent, in reality these probably won’t practically work. It is, however, still worth checking leases in case there is something more clear. Some of these include:
* Frustration - where something frustrates and ends the lease, only really possible with say a very short-term letting where the tenant can not access for the majority of time
* Derogation from grant - where the landlord does not deprive the tenant of 'quiet enjoyment', however, this lock-down has been government not landlord led.
* Rent cessers - clauses allowing rent to stop where the property in un-occupiable from a force majeure or other insurable event. There have been suggestions that tenants could try and reclaim rent back from landlords if their lease says so, leaving landlords vulnerable if it is too late to try and claim on any insurance policy (if possible).
* Fitness for habitation - under the Homes (Fitness for Human Habitation) Act 2018 for residential lets and homes not being habitable due to a "prescribed hazard".
Commercial landlords have been taking tougher positions with some larger corporate tenants such as lodging winding-up petitions, particularly retailers who are still trading to some degree but not paying any rent. The hospitality sector has also launched a campaign to urge the government to support a nine-months rent-free period, and a proposed Furlough Space Grant to help cover fixed retail property business costs.
Therefore, it’s best to look at how a business or individual can receive help elsewhere in order to take pressure off costs, before then seeing if some form of rent can still be covered.
It is bad timing towards the end of March when the lock-down began, just as the March quarter or April monthly rent is due.
If it’s just a case of getting through the next few months, then a landlord will probably help reduce the rent or allow a delayed-payment.
However, even with such savings, if there is still little future hope then you need to get more realistic and look at ending leases or using other security.
A break option may be coming up, but make sure they’re triggered in the correct way.
Any rent deposit could also be used by a landlord to draw upon, but carefully check deposit deeds and the basis of these being held and released (and then paid back). The government has clarified with residential deposits that these can absorb rent reductions.
Also, check to see if there are any direct guarantors, former tenants, or AGA agreements to call-in to pay arrears.
And if you know a lease is coming to an end via natural or forced means, check any notice requirements on issues such as tenant re-instatement of alterations, and whether any interest in due on arrears.
You also need to tread carefully where a lease is holding-over as a business lease under the Landlord & Tenant Act 1954, or a Statutory Periodic Lease for residential. Notices may be needed before simply assuming termination and keys are handed back.
However, on a positive note, it will be worth spotting any areas and properties that are seeing activity, even though this is not the normal type of arrangement, for example increased demand for small industrial units to store stock. The BPF have a standard short-term agreement here.
With commercial property leases there is an opportunity to re-gear them for longer terms for may be initial rent frees, and sale-and-leaseback transcations where freeholds are sold to raise capital but the seller takes a lease back to still occupy the property.
Students are having a hard time with little prospect of even returning to unievrsity and colleges the next academic year never mind this one, and no government support towards rent payments on accomodation they are no longer in.
4. Mortgages and Finance
The interest rate has been slashed to 0.1% which will help reduce any property-owner mortgages and loans on a rate that is linked to this.
Funders also need approaching for ways to agree a payment holiday in order to ease the financial burden, particularly with no rents coming in for say buy-to-let or commercial mortgages.
Also, watch out for any valuations just being completed, as in reality values will be dropping even though on paper they may still be the same until other comparables in the market are affected.
On the subject of say rent arrears and how to recover these, if this does resort to going legal with solicitors then just be aware of costs soon racking up, particularly when things get more complicated and delayed in these circumstances. There was also an interesting article here about how solicitors themselves may be hitting hard times.
Plus, on a practical note, there is difficulties in arranging surveyors to actually inspect properties for funding and general building purposes at this time.
5. Insurance Cover
This will become more important as time unfolds, but make sure you're on top of it sooner rather than later.
Building insurance is key, particularly building owners and landlords who arrange. Commercial properties are becoming vacant as businesses close, and you may need to inform the insurers to confirm what vacant-property requirements are needed.
They may not fully know themselves whether any special COVID-19 requirements are needed, but still try, and confirming it in writing.
And tenants; make sure you formally tell your landlord and check lease requirements.
Bottom line – there’s now a higher risk of break ins and damages with unmanned properties everywhere.
Also check other type of insurance such as contents, particularly if you’re leaving items within a property. And let them know if you’re re-locating things to another address.
Plus any business interruption policy is worth checking, although doubtful to cover these extreme circumstances. There has been publicity over Hiscox defending a claim on their business interruption policy on the basis that this kind of pandemic was not intended to be covered (and the FSA now being involved and dealing with issues here), and report in the Guardian here of potential success.
6. Cleaning Considerations
Of course this is a key issue, particularly at the start of the outbreak when all new, however, everyone now is becoming more familiar with what cleaning is required.
The legal obligations come from the Control of Sunstances Hazardous to Health Regulations 2002 (COSHH) from the main Health & Safety at Work etc Act 1974, with the key being who is in 'control' of different areas. The main source of help and reporting is the Department of Health and Social Care and Public Health England.
Just watch out for the detail though, with cleaning contractors confirming correct COVID-19 compliance in writing. The right disinfectant sprays, masks and gloves PPE, extra-cover on prone areas like handles and banisters are all paramount.
Properties may not necessarily need additional cleaning, or a one-off deep cleaning; just doing what they already do in the 'right' way.
If cleaning has to stop in say a vacant building, then not only gear-up for a full clean when re-occupied, but let all occupiers know in writing in order to take extra precautions whilst visiting the property in this state.
7. Services & Maintenance
Properties will still need maintaining and looking after, even when they’re vacant, and certainly when they’re being used more.
You need to quickly bottom-out who’s responsible for what, and which ones need continuing with.
Also, remember what overall duties of care exist under common law and statute irrespective of what a lease may dictate, for example with disabled and vulnerable persons.
There may be more than first meets the eyes with things like heating and water simply being turned off in empty buildings. It may be worth ticking these over in order to cover any cold spells.
As the weeks roll on, make sure simple weekly water tap tests and monthly temperatures checks are still being taken in order to reduce the risk of legionella, and maybe prepare for any fresh water samples before a property becomes re-occupied.
Fire systems requiring say weekly bell testing, regular alarm maintenance, and emergency light tests will probably still need to be continued with, however, for vacant or reduced-occupation they may not – check with the experts.
Lifts might also need to be out of action and security alarms and fire-alarm-panels with monitored-lines kept active with amended call-out procedures.
Check with contractors what they can and are willing to still do. With continued lock-down, it’s going to become more difficult and expensive to actually get them on site as they suffer as a business themselves in these times and employees being on furlough.
Businesses must consider how they practically use contractors, visitors, cliennts/customers, and employees as we enter the new social-distancing era post lock-down. Even removal companies are having issues here.
Plus, see if they can help with any general building checks whilst there as well.
8. Sufficient Utilities
As a general trend, commercial properties will be using less and domestic more as people settle into lock-down and self-isolation.
Therefore, budget accordingly with say higher gas and electricity charges at home that technically are a result of your work/employment.
See if utility contracts can be changed to get better rates, including where consumption is down.
For more domestic properties with a prepayment meter, then struggling tenants may not be able to afford these and therefore special arrangements being needed to cover.
And don’t forget Internet lines, the lifeblood of modern life, with sufficient connection, speed, and reliability to where people are.
Instead of new or improved lines, there may be remote dongles on mobile phone contracts that can work and be up-and-running quickly.
As a minor point, with TV licenses the plans to charge for over 75s is now delayed.
Plus on a practical note, if certain utilities are not being used then see if they need turning off at taps and switches – or not as the case may be.
9. Updated Documentation
Ideally new or amended policies are required showing adherence to COVID-19 risks – this is all new, therefore lots of Health & Safety and Legal advisors will be working on this.
It might be a specific property Risk Assessment, or a more general policy on say business continuity.
Others may also need to note these risks, for example Health & Safety and Fire Risk Assessments.
And as plans emerge to come out of lock-down, fresh procedures will be required in line with government guidance for employers and businesses and accomodating issues like social distancing.
Also, suss-out how this is communicated through say notices at buildings, circulated documentation, and general updates and emails to people.
On the property transcation side of things, there has been a move towards electronic signatures on documents without the need of people being there.
The COVID-19 Action Plan for Properties
As we all continue to navigate through a whole new world of issues resulting from the Coronavirus, it is important to see early on how this will effect property interests, even if it does take a while to materialise.
We will keep updating this resource as things evolve, with links to other resources both on this and other sites in order to make sure everything is up to date as possible.
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