Covid-19 is not preventing deals, says real estate solicitor Summiey Khan who tackles current questions about the market
While we may not be conducting business activities in the usual way during the Covid-19 crisis, the Property market is still alive and kicking. There may be a slight delay, depending on the number of parties involved but I am still seeing a lot of activity in the market with many deals being completed.
I am continually receiving enquiries regarding residential and commercial property matters. Below, I set out the most frequently asked questions that I receive and my responses to them. There is a lot of information provided by the government and regulatory bodies however I hope the below will give some much needed practical guidance. Keep safe and well.
Q. Can I still apply for a new mortgage?
A. Lenders are still taking new applications but have now tightened up loan-to-value ratios, which means borrowers require a larger deposit than the traditional 10% for residential mortgages and 25% for buy-to-let. Approach your lender or finance broker directly to obtain the best possible solution to your circumstances.
Q. Can I get my property valued?
A. Following the Government’s guidelines, surveyors will only carry out a physical valuation if the property is vacant. If it is occupied then a desktop valuation can be carried out – each case will be decided on its merits.
Q. I am struggling to pay my mortgage – what do I do?
A. You can apply to your lender for a three–month mortgage holiday. Although the term “holiday’ has been applied, it is, in fact, a “pause”. Interest will still be applied on the outstanding debt – so you will end up paying more in the long term. It is important to note that this is not an automatic “holiday” and your lender will base their decision to apply a holiday period on your current circumstances and its affordability.
Q. What implications does COVID-19 have on residential tenancies?
A. The Coronavirus Act 2020 stipulated that from the 26 March 2020 until 30 September 2020, landlords must give all tenants three months’ notice if they intend to serve any notice seeking possession, or notice to quit. The Secretary of State also has the power to extend this period by up to a further three months.
From 27 March 2020, the Courts have suspended all ongoing housing possession cases. This means that neither cases currently in or about to go into the system can be progressed.
Q. My business is not essential and I had to close – do I still have to pay rent?
A. Landlords have been asked to be flexible with regards to rent payments during this period of uncertainty. If you are approached by your tenant for a rent holiday or a rent reduction then there are a variety of options that can be considered. For example:
Whatever the agreement, ensure this is in writing so that both parties are clear as to what has been agreed and for how long.
Q. What action can a commercial landlord take if tenants cannot afford to pay rent?
A. The Government announced that there is to be a moratorium on evicting tenants from certain commercial premises for non-payment of rent. Section 82 of the Coronavirus Act 2020 states landlords cannot evict commercial tenants whether by court action or by peaceable re-entry before 30 June 2020.
The Act provides some relief for landlords, in the sense that nothing they do during the moratorium applies will waive the right to forfeit for non-payment of rent. This means they will still be able to forfeit for the non-payment when the moratorium period ends, even if they have been in negotiations with the tenant or have otherwise acted as if the lease is continuing. The only exception would be if the landlord were to expressly waive the right to forfeit in writing.
Other options for landlords may be contained in their lease, we are happy to review the lease with you but some options may include:
Q. Can my lease be terminated by frustration as a result of Covid-19?
A. It is unlikely that Covid-19 will frustrate a lease unless the Courts determine otherwise. It will also depend on the terms of your lease.
Q. I have heard about using a Side Letter for my lease. What is it and how do I create one?
A. This is a letter which documents a temporary change and does not have a lasting impact on the terms of a lease. For example, your current lease states that rent must be paid quarterly. Covid-19 has affected your cash flow so you may want to agree a Side Letter with the landlord to change rental payment dates to monthly instead.
If you have a mortgage you should always check to see if you require your lender’s consent before entering into a Side Letter.
If the terms of the lease are breached then the side letter would normally stop being in effect and the landlord could ask for the rent at the full rate (if a concession was agreed).
We can draft/approve a side letter on your behalf for a fixed fee.
Q. I am a landlord of a commercial property. What happens with maintenance and repair obligations now?
A. The Government has not yet commented on, or legislated to alter, routine and emergency maintenance obligations and repairs. This means the obligations remain the same under section 11 of the Landlord and Tenant Act (or the terms of the tenancy/lease).
Q. How does postal service disruption impact on the service of notices under a lease?
A. It is important to check service provisions in leases and under statute very carefully to establish whether alternative methods of service can be used such as by hand.
For further information in relation to this article, contact Summiey Khan on 0208 951 6986 or firstname.lastname@example.org for specific advice. The remarks in this article are not a substitute for legal advice on the specific circumstances of any case.