My tenant can’t pay their rent

As the COVID-19 coronavirus continues to spread, it’s going to impact on more people’s finances. So, as a landlord in these times, you need to know how vulnerable your tenant is – for your own sake as well as theirs.

Some tenants will be fine, but some already have and will see their incomes affected to some degree, especially if their industries have been hit hard, such as airlines, food and drink and events.

If we manage your property for you, we’ll speak to your tenant and find out what their situation is. We’ll also advise them about what they need to do during the crisis and direct them to sources of help available to them to help boost their income.

However, if you currently self-manage, there are a number of important things to know and steps to take.

So, what’s the situation and what should you do if your tenant can’t pay their rent?

Extension of the notice period for evictions

Firstly, you need to know that the Government has introduced emergency legislation temporarily extending the notice period for evictions from two months to three. From March until September, you can still serve notice on your tenant, but you can’t apply to the court for possession for three months. As things are changing on a daily basis during the crisis, bear in mind that this may be amended or extended at any time.

Most tenants will be honest and continue to pay rent if able, but a small number may try to take advantage of the situation and simply choose to stop paying. Remember, you can’t withhold utility services (i.e. turn off electricity, gas or water), harass them or use any kind of physical force. If you do, you could be prosecuted yourself.

Speak to your tenant

Hopefully your tenant will be up-front and give you a reasonable amount of notice if they know they’re not going to be able to pay their rent on time and in full. But if they don’t, then contact them right away once you know payment hasn’t been made.

Communication is key here, so find out what position your tenant is in and see if you can agree a payment plan.

It’s important to understand that these are not normal times. So, as coronavirus continues to impact jobs and businesses, you as a landlord need to play your part and help where you can. Some landlords are offering tenants discounted rent for a period of time; others are reassuring tenants that if they become ill and can’t work, they’ll support them.

However, the first way to help your tenant is to point them towards ways of securing an income if they are sick, lose their job or can’t work due to the lock down.

It is better they boost their income which will allow them to pay other bills such as food and utilities than behind on their rental payments.

Make sure your tenant knows about the help that’s out there for them

On top of the ‘standard’ financial help available for those who are sick or need income support, the Government has introduced some temporary measures to help with the specific impact of coronavirus. A brief summary of what’s available:​

• For tenants on benefits: These should continue. If they usually work and also receive benefits but then lose their job, they should contact the local housing office to see what extra help is available. The good news is that the Chancellor has increased unemployment benefits and re-linked Local Housing Allowance (LHA) rates to local rents so tenants on Universal Credit (UC) should have access to a bit more financial help than before
   
• For tenants that are employed but have fallen ill: They should be able to get statutory sick pay from day one (previously day four). Advise them that they will need to secure a sick note – either from NHS 111 online or from their employer
   
• For tenants that have lost their jobs: They can apply for universal credit. Note that the Chancellor has removed the minimum income ‘floor’, to boost the amount of financial support available to the self-employed who were on low incomes.

In all cases, direct your tenants to the government guidance online which gives details about the financial support available, and advise them to contact the Local Authority, as all councils are being given emergency funding to help people.

If after securing income support, the tenant still needs help with their rent, make sure you ask your tenant to put a request in writing that they need financial support due to the coronavirus crisis, stating why: they’re ill, self-isolating, lost their job, etc. This is important to help you access support yourself if necessary.

Other steps you can take if your tenant can’t pay their rent:

• If you have a guarantor for the tenancy agreement
  Contact the guarantor to check whether they can still cover the rent payments. Be aware that their financial situation may have changed due to the crisis

• If you have rent protection insurance
  Call them and check whether you can claim. Even if your tenant is still paying their rent at the moment, it’s worth double-checking whether you’ll be fully covered during the crisis

Rent protection insurance

The Government’s emergency legislation for evictions has had an impact on the rules around rent protection insurance. As such, new policies are not currently available.

If you already have insurance: Speak to your provider as soon as possible to check whether and how you can claim.

If you don’t currently have insurance: You might be worried about what will happen as time goes on – even if your tenant is still paying their rent at the moment. Unfortunately, some new policies won’t not be available until the insurance industry has a better understanding of the new, temporary legislation.

• If you have a Buy to Let mortgage
  The Government has recently announced a three-month mortgage payment break, so speak to your lender. A short break from having to pay could help you considerably, especially if you rely on your tenant paying their rent in order to make your own monthly payments. See our article on ‘BTL mortgage ‘payment holidays’ during the coronavirus crisis’

If you’ve got any queries or concerns, or would like us to speak to your tenant on your behalf, you will find the best way to contact us by looking at the contact details on your local branch page our website.