A long road ahead for the rental property sector

4 December 2020 | Investment

The residential and commercial lettings market has always required those involved to be on their toes in order to keep up with the ever-changing nature of the law. During the pandemic, this is true more than ever with laws and deadlines being updated regularly.

After a tumultuous year, it is understandable that landlords are nervous about the future. The ups and downs of 2020 have brought about many changes and uncertainties for both the commercial and residential renting sector.

In a continually changing market with many experiencing a lack of job security, understandably tenants might be less sure about their needs for premises and more cautious to commit to taking on extra space, particularly for a longer contract.

Adding to this worry from a landlord perspective is that insurance policies in the real estate sector, even where they cover the virus, may not pay out. There has been significant case law challenging this position but we await further guidance from the senior courts.

Law changes for residential landlord laws

As a result of the virus, the government enforced many restrictions on residential and commercial landlords and how they can lawfully deal with an non-paying tenant.

For residential landlords, from March three things were changed for when a tenant cannot pay their rent. For a conventional, short-hold tenancy with arrears accruing, most notice periods were extended to six months and all claims that had already been issued were stayed until 20 September. Also, all evictions from March to September were cancelled.

For commercial landlords, there continues to be a ban on forfeiture (ending of a lease) on the basis of non-payment of rent. This will continue until 31 December. Landlords also cannot issue winding up proceedings for non-payment of rent, nor can they use Commercial Rent Arrears Recovery in the usual way.

The immediate future

For the foreseeable future, there will be considerable delays for landlords. If you are a residential landlord and you have a tenant in your property with months of arrears, or who is at the end of their fixed term, you should explore issuing a section 21 or section 8 notice as soon as possible. Which notice is suitable for an individual situation will depend, and so it is important early advice is sought.

If you are a commercial landlord, you could explore issuing a civil claim for arrears. However, there is a voluntary Code applicable to the commercial landlord and tenant relationship which parties should give consideration to. Again, it is best advice is sought on your options.

Looking further ahead

At this time, it is difficult not to have a bleak outlook on the future of the property sector. Particularly for landlords where new laws and restrictions implemented over the last few months have seemed to favour and protect the tenant over the landlord.

However, it is not all doom and gloom for the future of the property sector. While we have been grappling with Covid-19, in July there were more start-up businesses than in previous years, a trend mirrored from the 2009 recession when some of the biggest worldwide companies were established.

Although these businesses will need time to grow, looking into the more distant future these companies will generate an increase in tenants both commercially and residentially in the area.

It is a difficult time for landlords in both the residential and commercial sectors. Understanding the laws and keeping up to date with the government’s changing guidelines is more important now than ever and will ensure you protect your financial situation while still remaining lawful.

*Lee Pearce is Partner and Head of Dispute Resolution at Ellisons Solicitors

This post has originally been featured in Property Investor Today.