"There are potential hurdles to overcome particularly when it comes to tenants being unable to pay their rent, or indeed being unwilling to pay their rent."
We talk a lot in the buy-to-let sector about the professionalisation of landlords over the past five years in particular, especially given the array of (ongoing) measures they have had to deal with.
The truth of the matter is that they’ve needed to become more professional in their approach in order to continue making their property investments profitable and to sustain their involvement in the private rental sector (PRS).
However, professionalisation does not necessarily mean a move to portfolio status – defined as having four or more mortgaged properties - and therefore we still have thousands upon thousands of landlords active today with one or two properties to their name. Indeed, the sector has its very survival to thank for this army of smaller landlords even during a time period when there has been very little for them to be thankful for.
Despite the financial challenges posed by the Government approach to smaller landlords they have managed to stay the distance, although things do not get any easier, as they now face potentially an even bigger challenge in a Covid-19/post-lockdown environment.
For every stamp duty holiday – which somewhat miraculously this time also applies to landlords – there are potential hurdles to overcome particularly when it comes to tenants being unable to pay their rent, or indeed being unwilling to pay their rent.
At present, evictions are suspended in order to provide the necessary security for tenants but at some point in the future landlords who are dealing with non-paying tenants or unsociable tenants are going to need to have a mechanism to remove them from their properties. This becomes even more of an issue when you have perhaps just one property that normally provides you with an income top-up each month or indeed you cannot currently make that property work financially without any rent.
I read a recent piece by Baroness Ros Altmann about the future Governmental approach towards smaller landlords and their tenants in a post-lockdown environment and there was very little to disagree with in it. The Baroness set out four measures that she believes the Government should introduce in order to support those smaller landlords. These were:
• A Government message to tenants telling them that they must continue to pay their rent, where possible.
• Support including mediation to agree rent payment plans where arrears have built up.
• Court reforms to speed up possession cases including online hearings and web-based arbitration.
• Plans in areas where local lockdowns may be brought in so that landlords and tenants are clear on the possession process.
All of these would go a long way to delivering the type of clarity that is required especially for those landlords who do not have the portfolios which might be able to manage a lengthy void period.
The truth of the matter is that the stamp duty changes are also designed to help landlords add more property to the PRS supply chain; what we don’t want to see is a situation where existing landlords feel that they can no longer be active in the sector. For every landlord the stamp duty change might entice into purchasing, we may have a much larger number of existing landlords feeling that their only way out is to sell.
For a sector that is crying out for more supply, that simply won’t do. We need to empower landlords to be able to deal with tenancy issues that arise and, at some point in the future, to be able to find a happy medium with tenants in order to have their rent paid and to be able to clawback the arrears.
It is of course a very difficult time and this won’t be resolved in the very short-term but we do need to get to some of the solutions outlined by Baroness Altmann if we want to ensure a much more stabile environment for smaller landlords to be active in.