Friday, 8 January 2021

COVID-19: Ban on Residential Evictions Extended

 The ban on enforcing possession orders, due to expire on 11 January, has been extended until 21 February 2021.

There has been a significant change however to the substantial rent arrears exception.

“Substantial rent arrears” now means at least an amount equivalent to 6 months’ rent, down from the previous 9 months.

Furthermore, it now appears the arrears will be counted no matter when they were incurred, even if they were incurred after 23 March 2020.

So tenants who have built up 6 months of arrears because of the pandemic are now at risk of eviction.

Government Announces Leasehold Reforms

The government has announced leasehold reforms they say will be part of the “biggest reforms to English property law for 40 years”.

Millions of leaseholders will be given the right to extend their lease by a maximum term of 990 years at zero ground rent.

Under current rules, leaseholders of flats can extend their lease at a zero ‘peppercorn’ ground rent, but usually only for 90 years. Leaseholders can also face high charges to extend their lease. For leasehold house owners, which face slightly different rules, they can also face barriers when they look to extend their leases.

The announced changes mean both house and flat leaseholders will be able to extend their lease to a new standard 990 years with a ground rent at zero.

An online calculator will be introduced to make it simpler for leaseholders to find out how much it will cost them to buy their freehold or extend their lease.

The government is abolishing prohibitive costs like ‘marriage value’.

Practitioners in this field are irritated that the announcement has been made in advance of more detail, but the general thrust of what is being proposed will be welcome.

One thing I haven't seen mentioned is the fact that if these 990 years leases at nil ground rent also do not include forfeiture clauses, then they create the right to be enlarged into freehold titles under Section 153 of the Law of Property Act 1925.

Where that happens, two freehold titles exist side by side, the original landlord’s title and the newly enlarged title.

A simple way round that would be to include a forfeiture clause, although it should exclude forfeiture for insolvency for the property to be mortgageable.

Leasehold enfranchisement is a notoriously complex area of practice, and previous legislation has been a nightmare to navigate.

It will be interesting to see how this reform progresses.

The government also wants to press ahead with plans to reinvigorate commonhold as an alternative form of property ownership.

The government is establishing a Commonhold Council - a partnership of leasehold groups, industry, and government - that will prepare homeowners and the market for what it hopes will be the widespread take-up of commonhold.

Last year the Law Commission published three reports on Commonhold, Leasehold Enfranchisement and Rights to Manage.

The commonhold report was called “Reinvigorating commonhold: the alternative to leasehold ownership”.

I summarised these proposals in July 2020.

It seems my cynicism about whether anything would happen may have been misplaced!

Professor Nick Hopkins, Commissioner for Property Law at the Law Commission said:

“We are pleased to see government taking its first decisive step towards the implementation of the Law Commission’s recommendations to make enfranchisement cheaper and simpler.

The creation of the Commonhold Council should help to reinvigorate commonhold, ensuring homeowners will be able to call their homes their own.”

Whether that proves to be the case will ultimately be down to developers and lenders.

Thursday, 7 January 2021

COVID-19: Ministers Need to Get a Grip of the Rent Debt Crisis

In a joint statement following the reintroduction of a national lockdown, the National Residential Landlords Association, The Big Issue and Ride Out Recession Alliance, Shelter, ARLA Propertymark, the Nationwide Building Society, and StepChange the Debt Charity have said:

“Many thousands of private renters and landlords across the country now face rent arrears due to the impact of the pandemic.

“Ministers have failed to address the core problem of debts which have built despite the financial package put in place so far. Indeed, the Chancellor confirmed that housing benefit will not be linked to the cost of renting for future years.       

“Renters, landlords and letting agents cannot be expected simply to muddle through indefinitely where they face these financial difficulties. The Government needs to develop an urgent package to help renters in paying off arrears built since March last year.

“Without further action, debts will continue to mount, making it far more difficult to sustain tenancies and keep renters in their homes after the pandemic.”

The NRLA recently published new research relating to this issue. A survey of tenants, carried out by Dynata for the NRLA, suggests that more than 800,000 private renters in England and Wales have built rent arrears since lockdown measures began.

Whilst the average arrears were between £251 and £500, the survey finds that of those in arrears, 18% now have rent debts of more than £1,000. This would equate to over 150,000 renters.

For residential tenancies, the government lifted the stay on all forms of possession proceedings on 21 September 2020, subject to restrictions, but there is currently a ban on enforcing possession orders until 11 January 2021.

That ban is subject to exceptions including trespassers, nuisance or where there are substantial arrears of rent, as defined in the legislation.

The Prime Minister has said the ban is “under review” after Labour leader Sir Keir Starmer called for it to be extended, but at the time of writing nothing has been announced. 

It’s likely the ban will be extended, so why is this being left to the last minute? [UPDATE 08/01/21 - the ban has now been extended until 21 February 2021, but with some important changes]

Nevertheless, as Ben Beadle of the NRLA says:

“Ministers need to accept that simply banning repossessions does nothing to keep tenants in their homes long term. In fact, it will achieve the complete opposite - kicking the can down the road just means larger debts piling up, creating a bigger problem for tenants and also for landlords.  

To sustain tenancies the Government needs to provide an urgent financial package to get rent debts built due to the pandemic paid off.”  

The NRLA is calling for a financial package that includes a mixture of government guaranteed, interest free, hardship loans and a boost to benefits for those relying on them, rather than cutting this support as announced in the Spending Review.

Tuesday, 5 January 2021

COVID-19: New Lockdown Grants to Support Businesses

The government has today announced one-off grants for businesses in the retail, hospitality and leisure sectors that have been forced to remain closed in the new lockdown.

These grants will be property based and are worth up to £9,000 in cash per property, depending on the rateable value.

The government estimates this will benefit over 600,000 business properties, worth £4billion in total across all nations in the UK. 

Business support is a devolved policy and therefore in Wales, Scotland and Northern Ireland it is the responsibility of the devolved administrations, who will each receive extra funding to pay for these grants.

The government’s press release says that the top-ups will be granted to closed businesses as follows:

·       £4,000 for businesses with a rateable value of £15,000 or under.

·       £6,000 for businesses with a rateable value between £15,000 and £51,000.

·       £9,000 for businesses with a rateable value of over £51,000.

Where it says “businesses” with a rateable value, it really means the property from which the business operates.

Businesses do not have to pay the grant money back.

These top-up grants are in addition to the various other business support schemes, which include 100% business rates relief for retail, hospitality and leisure business, and the extension of the furlough scheme until the end of April 2021.

As these are property-based grants, they will not help those involved in the supply chain to those businesses, for example breweries that supply pubs.

Although any financial help is welcome, the consequences of the latest restrictions, with non-essential retail and full hospitality having already been closed for several weeks, will be severe for many businesses, and these top-up grants will not be adequate compensation.

Business groups have said the money will not be enough to save many firms from collapse. 

The British Retail Consortium has said the biggest difference the government can make is to extend business rates relief from April for those hardest hit by repeated lockdowns. 

For now, we will have to wait until 3 March 2021 to see what further support packages may be included in the Budget, which the director-general of the CBI, Tony Danker, has said will be too late for many businesses.

In early December 2020, the business evictions ban was extended until 31 March 2021.

There hasn’t been any indication yet whether this ban will be extended any further in light of the new lockdown.