Testing time for landlords
CORONAVIRUS is piling pressure on buy-to-let landlords as tenants lose their jobs and properties lie empty because nobody can view them.
Amateur landlords were already reeling from the Treasury’s recent tax attack, which reduced mortgage interest tax relief and cut profits.
Many are now confused over how they should treat tenants whose income has been hit by Covid-19, and what support they can claim if they are struggling to afford their buy-to-let mortgage.The Government has said that tenants must continue to pay rent if they can. Most are able to thanks to the Job Retention Scheme, which pays furloughed staff 80 per cent of their salary up to £2,500 a month.The unemployed may find State benefits are insufficient, though.
Lucy Pendleton, managing director at estate agent James Pendleton, said if tenants request help, check their circumstances have changed by asking them to complete an affordability questionnaire: “A significant proportion of tenants retracted rental holiday requests after assessing their finances in detail.”
Do not rush to evict tenants, as this takes time in normal circumstances, while the notice period has been extended from two to three months during the pandemic. Courts have suspended repossession cases until at least June 25.
If your own finances are being squeezed, Pendleton said check whether you can save money by remortgaging: “Finding a cheaper deal could save thousands.”
Holly Herbert at We Buy Any House said being flexible with loyal but struggling tenants can pay off in the longer run: “It may encourage them to stay in your property long-term, sparing you the cost and hassle of finding new tenants.”
Tenants and landlords should agree a schedule to repay the suspended rent.
Landlords can themselves take a three-month mortgage payment holiday but Mark Harris, chief executive of mortgage broker SPF Private Clients, said you still have to repay the interest at a later date: “If you have a cash buffer, consider dipping into that instead.”
Those who run their property letting empire as a business may qualify for support under the Coronavirus Business Interruption Loan Scheme, he added.
Some investors will be keen to use the uncertainty to snap up bargain properties, but Harris warned that transactions could take longer to complete, and doing up properties could be slow: “Make sure you have the cash to cover any delays, especially if you are targeting the autumn student rentals market.”
MELT Property chief executive Evan Maindonald said the biggest difficulty landlords now face is letting empty properties.
MELT is offering initial video viewings, followed by controlled physical ones: “We meet prospective tenants outside and hand over the keys.We use appropriate protective equipment and wipe surfaces.”
Cash-strapped landlords should only sell if they urgently need money: “In a few months, we are likely to see a strong bounce back.”