HM Insights

Coronavirus: end to residential tenancy disputes and problems for landlord income

As the country continues to tackle the COVID-19 pandemic, the court chamber which deals with residential tenancy disputes ranging from determination of rents, repairs and eviction proceedings -  the First-tier Tribunal for Scotland (FTT) (Housing and Property Chamber) - has announced significant changes to the way it conducts business.

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What has been announced?

  • The Housing and Property Chamber has postponed all case management discussions and hearings of the Chamber until the 28 May 2020 at the earliest.
  • Applications will allegedly continue to be accepted by the Tribunal. These applications will advance to the point of notification of acceptance in anticipation for fixing a case management discussion or hearing. This hearing will be fixed once the tribunal is back up and running. However, with Glasgow Tribunal Centre having closed following the imposition of Government restrictions on the public, it seems unlikely that any real progress will be made.
  • It has been speculated in the media that the Scottish Government is considering imposing a six-month ban on residential evictions.

Implications for landlords and their income

There are a limited number of ways for a private sector residential tenancy to be brought to an end, depending on the type of tenancy between the parties: by agreement between the parties; by the tenant giving notice; and by a landlord giving notice as required by the relevant legislation. Landlords can only evict tenants if they follow these correct procedures. Those procedures ultimately end with the FTT.

The suspension of hearings in the chamber means that there will be no new eviction orders given for private rented tenancies until at least the 28 May 2020. As a result, landlords will be unable to repossess their properties in severe breaches of the tenancy agreement. The Scottish Government has signalled that it wants to go further than this limited suspension and hopes to amend the rent arrears ground for eviction under private residential tenancies from three months to six months. This policy goal is deemed necessary in these unprecedented times due to the economic impact of social distancing measures.

The measures taken to tackle the COVID-19 crisis have resulted in business closures across the country; the key message being to stay at home. With this comes earnings decreases and in some cases even job losses. This will see household budgets overstretched and could see many plunged into rent arrears. This would put tenants in breach of their tenancy agreements. However, with the court closures and the planned amendment to the eviction grounds, landlords will be paralysed in their ability to minimise losses during this period.

While the policy goal pursued by the Government is desirable to avoid mass evictions, it will transfer the financial strain of this uncertain period onto private residential landlords. They are not immune from the impending economic crisis and may also see their main income take a cut. This may leave landlords questioning what options are open to them in these uncertain times.

Support for tenants

The Scottish Government has signalled that they want landlords to be as flexible as possible during this time. Their key advice has been for landlords to encourage tenants to contact them as soon as possible if they are in, or think they will be in, financial difficulty and unable to pay rent. This will allow landlords to pre-empt any reduction in their income and to plan for this accordingly.

Support for landlords

Nonetheless, this does not help to mitigate the financial burden that six months non-payment of rent will have on landlords.

Those landlords who have mortgages over their second properties could be particularly worried about this additional financial pressure.

Lenders are aware of the hardship faced by many, including landlords, and have signalled that they will be flexible during this time. They have made it clear that landlords will be able to apply for a three-month payment holiday on their mortgages. Additionally, UK Finance, the collective voice for the banking and finance industry, has indicated that they will initiate a possession moratorium. This will suspend all possession proceedings for 90 days for mortgages arrears. These measures will give landlords much needed breathing space to fully deal with the economic impact of COVID-19.

We're here to help

Harper Macleod's experienced litigation team is able to help provide certainty in these uncertain times. The options open to landlords are not as limited as they may seem. Instructing us at an early stage will allow us to fully advance your interests and help you take steps to mitigate the financial burden caused by Coronavirus.

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