Coronavirus, landlords credit files and licensing

OK, I’m forced into writing another post on the Coronavirus. This one looks at Coronavirus, the impact on a landlords credit file of taking a “mortgage holiday” and whether extensions or new landlord licensing schemes should go ahead.

Coronavirus, landlords credit files and licensing

About a month into the Coronapanic and I have had just one tenant contact me about potential problems with paying their rent. In the end they paid anyway.

Therefore, so far all is good – and with the Bank of England dropping the base rate to just 0.1%, I am in the money on my funding costs too. (All but one of my mortgages are linked to the Bank of England base rate, most of them are linked to it for life. If you are on a great, historic base rate tracker you should think very carefully before leaving it ).

I have taken the view to not contact my tenants about the coronavirus.

Why?

Well, I know that they are all bright people and will contact me if they need to discuss any problem they are having paying their rent. Being bright people, they will be more than capable of finding out what help is available to them from the government – the furlough schemes, the universal credit, the help for small business owners etc. I am not their parent – and should not have to guide them in this regard.

In a previous blog, I discussed some of the help that is available to landlords – which is actually very limited.

Coronavirus, credit files and landlords

One of the main ways is to take a so called “mortgage holiday”.

I say, “so called” because the money with interest has to be paid back.

The idea with these mortgage holiday is that you give the money you temporarily saved back on the mortgage payments back to the tenant, who then pays you back later on, as agreed between the tenant and yourself.

But I would be wary of these schemes.

Sure, your credit score is not affected, but the reality is that your agreed “zero payment” for the month with your lender will show up to other lenders. Most experts, including mortgage brokers say it will affect your ability to get a mortgage loan or other credit in the future from another lender.

So the conclusion is that you should avoid taking advantage of the scheme if you can. Agree a rent reduction with the tenant, if you must, but keep it low and manageable for the tenant and do all you can to avoid having to take advantage of this mortgage holiday scheme.

If contacted by a tenant who is struggling to pay rent as a direct result of Coronavirus, you should make sure the tenant is aware of what help is available. Point them to the government website pages for help with this. Tell them to act quickly because claims can be backdated to date of application and not before. Help them if they really need it – and have a plan in place for them to pay you back. Point out that any “mortgage holiday” you may be eligible for is not a freebie – it will have to be paid back, just like their rent.

There is one thing the government could do to further help tenants: I’d like to see Universal Credit paid to everyone immediately and the 5 weeks wait set aside. These are challenging times and this would help greatly.

For landlords, I’d also like to see council tax charged at nil where a property is unoccupied because a previous tenant has moved out. As it stands now, whilst landlords (supposedly) cannot do viewings, we have little chance to fill empty properties.

And until the government and main TV media stop scaring the nation half to death over this virus, which, lets face it has killed only one in 2,500 people in the worst hit country (Italy), then we have little hope of securing another tenant easily. (However, if you market a place at a competitive enough rent, people will still come to view, especially if the property is empty and sign tenancies, but the discounts from market rents may have to be quite steep to secure interest).

Coronavirus and licensing schemes

Finally, despite recent set backs, there is quite a queue of local councils keen to tax local good landlords more by setting up new licensing schemes.

Landlords groups have recently been quite effective at pushing back on other planned schemes and scheme extensions by pointing out that they do nothing to root out rogue landlords, stop antisocial tenant behaviour or deal with low housing demand – and exist simply as a way of taxing good landlords.

So , both Coventry and Waltham Forrest recently announced and planned extensions to their existing HMO licensing schemes ought to be put on hold whilst the virus is raging. Other schemes that are planned or coming in the next few months ought to be held for now too.

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