The coronavirus (Covid-19) is causing widespread disruption across Scotland and the UK as a whole. Many people are worried about losing their job and this worry is even more prevalent amongst the self-employed who have less job security and may be feeling the immediate effects of the pandemic.
As job losses increase and earnings decrease, many will be looking to cut back on their monthly spending. As living costs (rent and mortgage) are one of the single largest monthly expenditure for many households, it is foreseeable that many may find that they are unable to meet such costs resulting in an increase in the number of tenants and homeowners falling into arrears.
What steps should landlords take?
It is important that landlords review their debt recovery process to take into consideration the effects of Covid-19.
Despite the possibility of a substantial increase in rent arrears which could significantly affect many individuals and businesses, the Scottish government is urging landlords, both within the private sector and social rented sector, not to evicts tenants in the event of financial hardship due to Covid-19 and has assured landlords that the Scottish government is actively looking for solutions to assist both landlords and tenants.
The Scottish Housing Minister, Kevin Stewart, has suggested that “people affected by Covid-19 who are concerned about paying their rent can claim Universal Credit from the Department for Work and Pensions, which includes support for housing costs, if eligible. The UK government has introduced some temporary changes to make this easier.” The minimum income floor for claiming Universal Credit has been temporarily removed for people who are self-employed.
Across the Border, the Labour Shadow Housing Secretary, John Healey, has drawn up draft legislation to stop landlords in England from evicting tenants who are in arrears due to the effects of the Covid-19.
Financial impact on RSLs
Any relaxations on rent collection will undoubtedly put an additional financial strain on landlords, who will themselves impacted by the economic effects of Covid-19. In particular, social landlords will need to consider what this means for their ability to implement their charitable and regulatory objectives, including any relevant funding obligations. If there is a fall in rental income then social landlords may have to consider cutting non-essential services and improvement works. If a social landlord halts pursuing evictions for rent arrears (including those arising prior to the current pandemic) then this could result in a lack of availability of social housing to those in need – at a time when we could be looking at an increase in the need for social housing.
Landlords should be aware of the issues tenants and services users are facing and should be prepared to open dialogue with any tenant or service user who is struggling to meet their financial commitments. They should also be looking at their business continuity plans and taking into consideration the impact that COVID-19 may have on their business going forward. This could include having discussions with secured lenders regarding 'mortgage breaks' or looking for additional financial support from the Scottish Government.
Get in touch
If you have any particular concerns regarding the effects of the Covid-19 on tenant rent arrears, please get in touch with a member of our team.