Landlords are expected to carry the financial burden of the government’s eviction ban during the coronavirus pandemic.
A new study estimates up to 400,000 private tenants will be in serious rent arrears by the end of the year.
Huge numbers face eviction as landlords try to cut their losses, but the fear is property investors may face many months of arrears as courts buckle under the pressure of handling the cases on top of a backlog from the lockdown.
The report from the London School of Economics suggest one in 10 tenants are unemployed and this could rise as government data forecasts the jobless rate will rise to 5.5% before starting to fall as the economy grows.
Even with 10% unemployed, the rate is double the number of jobless tenants in a pre-COVID year, says the LSE.
The fear is the level of tenants in rent arrears means many eviction notices will not reach the courts before 2022 while tens of thousands more join the queue to wait for a hearing.
How long before eviction ban ends?
Before the pandemic hit, courts were taking an average 42 weeks to hear repossession cases – that’s on top of the notice period which was two months then.
Now, landlords must give six months’ notice for tenants to quit before starting court proceedings to take back a property.
“Before the pandemic it was taking a median of 42 weeks for cases to reach repossession – the mean length was nearer a year.,” Professor Christine Whitehead, Emeritus Professor of Housing Economics at LSE.
“Now the small number that are being processed are taking maybe twice that long. What happens when eviction notices are enabled is totally unclear – but if nothing specific is done it could take years to return to normality. Meantime many landlords will be receiving no rent for months on end.
“Most evictions remain on hold until after May 31. Depending on what the government announces will happen after this, many tenants could be vulnerable to being asked to leave their homes.
“However, we do not expect an immediate surge in evictions since, in many cases landlords and tenants have found ways of coping through rent holidays and lower rents during the crises, and some renters have moved in with family or friends.”
The government has indicated that notice periods will return to pre-pandemic levels from October 2021 and that the eviction ban will end 31 May 2021.
Government policy around the COVID-19 pandemic has been a series of measures aimed at limiting numbers of tenants facing eviction due to rent arrears.
At the start of the pandemic, private renters lived in 4.5 million homes – about one in five UK households. Especially vulnerable were 75% of renters earning slightly less than the average wage, with 35% living on their own.
In June 2020, data from housing charity Shelter revealed 5% of renters were already in arrears, which is double the normal pre-pandemic rate.
From August 29, 2020, landlords cannot start possession proceedings unless they have issued tenants with six months’ notice, except in some exceptional circumstances.
If the tenant owes more than six months rent, landlords can cut the notice time to at least four weeks.
The stay on court proceedings for repossession was lifted, but courts are only hearing exceptional cases.
The Ministry of Justice reported no bailiff repossessions took place in the last quarter of 2020 with claims dropping by 86%, with 57% of them made by social landlords.
May 11, 2021
The State Opening of Parliament takes place, with the expected announcement of the long-awaited Rent Form Bill coming before MPs and the Lords. The Bill includes a clause that scraps Section 21 evictions by landlords.
June 1, 2021
Notice periods to reduce to 4 months and eviction ban set to end 31 May 2021.
What does the future hold for landlords?
The LSE report discusses the likely outcomes for landlords wanting to evict tenants.
The main recommendation is putting more resources into county courts as the number of cases piles up but realising this is unlikely as the government needs to prioritise a backlog in the criminal courts that will do nothing to ease civil courts.
Other recommendations are scrapping Section 21 evictions, which the government has already put on notice and offering financial help to private tenants by lending them the cash to clear arrears and make future rent payments.
The Scottish and Welsh assemblies have opened their purse strings for tenants, but those in England have seen no financial aid.
Whitehead said: “Unfortunately, these solutions are at best partial. In a crisis of this magnitude, there are no easy answers. Even with a rapid transition back to normality (say by the end of next year), the long-term arrears and loss of creditworthiness among tenants and loss of income and confidence for landlords will continue to scar both individuals and the private rented sector for years. Private renting accommodates one in five households and many have no other option. If we are to avoid catastrophic future problems, we must ensure that the private rented sector remains sustainable.”
Tenant evictions – the current process
The government wants ease stress on the courts by urging landlords and tenants to negotiate a repayment plan for rent arrears.
If this fails, for assured shorthold tenancies, landlords should serve:
- A Section 8 notice if the tenant has breached the terms of their rental contract
- A Section 21 ‘no fault’ eviction notice to take the property back after the end of any fixed term rental contract
Landlords can then apply for a standard possession order if the tenants owe rent and have not left by the date to vacate the property on the notice.
If no rent arrears are involved, landlords can serve an accelerated possession order.
Should the tenants not leave by the date ordered by the court, landlords must apply for a warrant of possession that allows bailiffs to remove them.