HELP, MY TENANTS ARE STUCK
Before the coronavirus lockdown my tenants had given notice by email that they wanted to move out. Now they have asked to stay on in the light of the pandemic. I had other tenants lined up. What should I do?
Name withheld, Wimbledon
The tenants’ notice is only valid if it is in writing and gives at least a month’s notice (if rent was paid monthly) to end on the last day of the fixed term. It must also be served by post or in person, unless the tenancy agreement says that email is allowed.
If the notice met these requirements, the tenant cannot rescind it. An old, but little used law, the Distress for Rent Act 1737, provides that if a tenant gives notice to quit, then remains, the landlord is entitled to double the rent for the overstay. This may be useful to point out.
To evict the tenant, you must first get a court order for possession. You can bring such a claim if the tenant gave valid notice, but failed to move out. Because of coronavirus, all possession proceedings in England and Wales have been stayed for at least 90 days, so nothing would happen with the claim in that time.
If the notice was invalid, the tenant will continue on a rolling periodic tenancy after the end of the fixed term. You could end this under section 21 of the Housing Act 1988, for which you now have to give them three months’ notice instead of two.
Even before the pandemic you would have had no way to make the present tenants leave in time for the new tenancy to start. Now that is even more remote.
You could demand the costs of advertising the property from the tenants, if their notice was valid. If there is a signed tenancy agreement with the new tenants, they may be able to seek the costs from you of breaking that, and you in turn could seek those costs from the tenants who did not leave.
Giles Peaker, partner, Anthony Gold Solicitors
STUCK TENANTS BLOCKING SALE
My mother, 91, has been in a care home since October 2013 and for the majority of that time has been self-funding. Her property has been rented out and the rental income plus her pension, attendance allowance and her savings has paid the care home fees of £4,528 a month. The fees are due to be increased in April. Her life’s savings and some savings of my husband and I are now exhausted.
My mother knew her property would need to be sold to pay for her fees. On her behalf notice was given by the letting agent to the tenants to leave in May. To be fair to them, I gave them two months more notice than that required by law. Estate agents were briefed and valuations were completed at the earliest opportunity. I appointed an agent. Then the lockdown came.
I am now in a situation where the property cannot be sold, the tenants cannot leave or find an alternative property, and my mother’s care-home fees need paying. I am also staggered to learn that on the sale of the property my mother will be liable to pay capital gains tax (CGT). Can this really be true?
Carole Ludford, via email
From a housing point of view, if the estate agent has everything they need, you could start marketing the property now, assuming you were happy with the contract terms. We would advise against paying an estate agent up front at this stage, opting instead for an agent that is paid on a commission of the sale price.
There is no government guidance stopping you appointing an estate agent and putting the house on the property portals now, but the agent won’t be able to market your home in the usual way or conduct viewings, so you are unlikely to sell until restrictions have been lifted. I would also say to contact the care home and explain the situation.
Angela Kerr, director, HomeOwners Alliance
In principle, CGT applies to any disposal of UK residential property. Depending on the other income and capital gains of the seller, tax is due at a rate of 18 or 28 per cent on sale’s proceeds, less allowable costs. Allowable costs include the original price paid for the house, purchase and sales costs (eg solicitors’ fees) and the cost of any capital improvements. The cost of refurbishments is not deductible.
Where the house has been occupied by the owner, tax relief is available under the main residence or principal private residence relief rules. These are best understood using an example. Let’s assume that Mrs A and her husband bought their house in 1982 for £10,000. The house is now worth £550,000 and there have been allowable costs incurred of £40,000. Mrs A inherited her husband’s share of the house on his death. She lived there from 1982 until 2013, when she moved into a care home, and the house has been rented out since then. The house is sold in 2020.
Mrs A has a capital gain of £500,000, but not all of this is taxable: the whole period of occupation, of 31 years, is exempt, as is the final 36 months of ownership, because Mrs A is now in a care home. This means that the taxable gain will be roughly £500,000 x 4/38 years, which equals £52,600. Assuming that Mrs A sells in 2020-21 and makes no other capital gains, she can deduct her annual CGT exemption of £12,300 and will have a maximum tax liability of £40,300 x 28 per cent, which equals £11,284.
Andrew Robins, private client partner, RSM UK
DO I HAVE TO PAY COUNCIL TAX?
I own a house that my tenant has just moved out of and I was due to exchange with my new buyer. As the government has put things on hold for the next three months or so, will there be any hold on the monthly council tax due on these empty properties?
Tracie Green, via email
Unfortunately, there isn’t any help available for landlords in this situation, although we are speaking to the government regarding council tax relief for properties that are empty because of the coronavirus. In the meantime, however, landlords can still rent out their empty properties, so it might be worth considering offering the accommodation to key workers, if the property is close to a hospital or police station, for example.
David Cox, chief executive, ARLA Propertymark
AND DO I HAVE TO PAY IT TOO?
My tenant returned to Europe recently because of the virus. The house will have to remain unrented now for some months, although the bills will still arrive — council tax in particular. So is there any help for landlords to pay council tax?
Jo, via email
The initial step would be to double-check whether or not the tenancy has ended for the purposes of the tenant’s council tax liability. It’s worth speaking with the council regarding the specific situation and making sure that the council tax liability is in the correct name so that you aren’t, as a landlord, being inadvertently charged.
Assuming that the council tax liability does fall on you as the landlord, check with the local council as to what discount it will award for an unoccupied property. In many cases there is no reduction given, but it’s always worth checking to see what it will award. These discounts are individually set by local councils, so if one council doesn’t give a discount, another may.
A tenant of a property is typically able to claim Council Tax Support (also known as Council Tax Reduction), a means-tested benefit administered by the council, to help with payments. This benefit is not available to a non-resident landlord, although they can, instead, apply for the lesser-known discretionary reduction under section 13A(1)(c) of the Local Government Finance Act 1992. Discretionary relief is specifically intended to be used in times of financial hardship, so can be awarded in the present circumstances.
The amount of any reduction is determined by the council and can be up to 100 per cent of the outstanding balance. If the council declines the application, or you’re not happy with the amount awarded, you can appeal to a Valuation Tribunal for an independent decision. The Valuation Tribunal can, if it feels it is appropriate, override the council’s decision and substitute its own.
The government is looking at providing up to £500 million in extra funding to councils to assist with council tax payments, so even if you’re not able to get assistance at present, it may be worth asking again in the coming weeks and months to see if any extra help is available.
Craig Suddick, paralegal and council tax specialist, LGFA92
ARE LANDLORDS RESPONSIBLE FOR REPAIRS ON THEIR PROPERTIES DURING THE LOCKDOWN?
Landlords should only access tenants’ homes to fix or inspect “serious and urgent issues” during the coronavirus lockdown, new government guidance says.
This could include a broken boiler that leaves a renter without heating or hot water, a plumbing issue that means they cannot wash or use a lavatory, or a problem with the building fabric such as a roof leak. Other examples are critical security problems such as a broken window or external door, work to fit or fix equipment a disabled person relies on, and tests to fire alarms or emergency lighting. “No one should visit the property to conduct viewings,” the guidance says.
Private and social landlords should only send tradesmen where problems will affect a tenant’s “ability to live safely and maintain their mental and physical health in the property”, it adds. For non-urgent issues it advises a “pragmatic, common-sense approach”.
It says landlords should “make every effort” to comply with rules requiring engineers to check gas appliances and flues once a year, and, for new lets from July, the electrical installation every five years. If checks are impossible because tenants are isolating, or no engineer can be found, landlords will not breach rules if they have taken “all reasonable steps”. They should keep copies of all contact with tenants and contractors, as well as previous safety certificates.
Tradespeople “are still available, but on a limited scale”, says Susan Cohen, the head of lettings at Pastor Real Estate, a London estate agency. They must be well, with no coronavirus symptoms, and must stay at least two metres away from renters, under government rules.
Tenants are legally bound to keep paying the rent level due in their contract, the guidance confirms. If they are struggling, they should agree to a plan with their landlord, such as to pay less rent temporarily, or to repay arrears later. For the next six months landlords must give three months’ notice, rather than two, to tenants to move out, and courts will not hear any eviction cases until July. This also protects most people who part-rent their home through shared ownership, but usually not lodgers or property guardians.
If one sharer in a house in multiple occupation has coronavirus, landlords are not obliged to house them or other tenants elsewhere, the guidance says. “Nobody can be removed from their home because of the virus.”
Landlords no longer have to meet new tenants in person to check identity documents for their right to rent in Britain. During the pandemic, tenants can send them scans or photos of their documents. In a video call, tenants must show the original paperwork for the landlord to compare with the digital copies. If tenants lack the right documents, use the Home Office’s landlord checking service to find out whether they are allowed to rent without it.
Martina Lees, senior property writer, The Times and The Sunday Times
OUR SHORT-LET HAS BEEN CANCELLED
We sold and moved out of our house two weeks ago. We rented a holiday let for seven weeks while our new property was being completed; this was estimated to be by the end of April. We have now heard from the letting company that it is cancelling the last three weeks of our let. The completion of our new property, though, has almost stopped due to lack of staff and building supplies. We had hoped to extend our let until the end of May at least. None of the holiday rental companies is accepting new bookings until early June, so we may be left with nowhere to live.
David and Gay Beer, via email
The tenants should see if the landlord of the property they’re letting will change the holiday let to a standard six-month tenancy. If not, their only alternative is to try to find a property that will offer them a six-month tenancy.
David Cox, chief executive, ARLA Propertymark
MUST WE HONOUR OUR LEASE?
In December 2019 we signed an option agreement with a developer to demolish our house and build two others on the plot, one of which we will occupy and the other the developer will sell. In February 2020 the developer exercised the option with completion (moving out of our house) on April 20. The expected build period is 12 months.
In late February/early March we negotiated and signed a one-year lease for a flat starting on April 15 and entered a contract with removers. In good faith the developer and the removers have negotiated with us “coronavirus” revisions that safeguard all parties. Both have acted reasonably and fairly. On the other hand, the landlord of the flat has told us via email that we must honour the lease. Concerning the lease — what is the legal position and what should we do?
John Evans, Buckinghamshire
The arrangements for disposing of the property and the one-year tenancy are entirely separate. Unless you included a special provision in the rental agreement for the flat, it is unlikely it is conditional on the sale of the plot of land. The basic position is that, once a tenant signs a tenancy agreement, they are bound to honour their obligations in the tenancy agreement for the minimum period of the tenancy — and pay rent. This is the case even if the tenant never occupies the premises.
There are certain exceptions in the event that the agreement is frustrated by external events, but the present state of the law is that the Covid-19 pandemic is unlikely to be considered a frustrating event.
Mark Loveday, barrister, Tanfield Chambers