The government has issued a non-statutory document, COVID-19 and renting: guidance for landlords, tenants and local authorities, which addresses landlords’ concerns where tenants are unable to pay their rent due to the impact of the coronavirus. Some of the key questions include:

What can I do about mortgage repayments if I do not receive rent from my tenants? 

Mortgage lenders have agreed to offer payment holidays of up to three months where this is needed due to coronavirus-related hardship, including for buy-to-let mortgages. The sum owed remains due and mortgages continue to accrue interest during this period. 

Where a tenant is unable to pay their rent in full, the landlord should discuss this with their lender.

What can I do about rent arrears? 

Tenants should continue to pay rent and abide by all other terms of their tenancy agreement to the best of their ability. Tenants who are unable to do so should speak to their landlord at the earliest opportunity. 

An early conversation between landlord and tenant can help both parties to agree a plan if tenants are struggling to pay their rent. This can include reaching a temporary agreement not to seek possession action for a period and instead accept a lower level of rent or agree a plan to pay off arrears later. Where a landlord does choose to serve notice seeking possession for rent arrears or has done so already, the notice period and any further action will be affected by legislation lengthening the notice period and/or the suspension of possession claims. 

If a landlord and tenant agree a plan to pay off arrears, it is important they both stick to this, and that tenants talk to their landlord immediately if they are unable to do so. 

What are my responsibilities for repairs, electricity and gas safe during this period?

Even during the restrictions period, landlords’ repair obligations have not changed.  Tenants should inform the landlord if any necessary repairs are required well in time. Landlords and tenants should take a pragmatic, risk-based and common-sense approach to non-urgent issues.  

Urgent repairs could include (but are not limited to): 

  • if there is a problem with the fabric of the building – for example, the roof is leaking 

  • if the boiler is broken, leaving the tenant without heating or hot water 

  • if there is a plumbing issue, meaning that the tenant does not have washing or toilet facilities 

  • if white goods such as fridge or washing machine have broken, meaning that the tenant is unable to wash clothes or store food safely 

  • if there is a security-critical problem, such as a broken window or external door 

  • if equipment a disabled person relies on requires installation or repair

  • if there are any gas or electrical inspections required, and the landlord is not able to engage a contractor to carry out the necessary work, they must document their attempts to do so and all correspondence with tenants. 

Can I ask my tenant to quit if I am planning to sell?

The government now lifted the temporary ban on the housing market: details are here.

The Coronavirus Act 2020 has provided new measures for landlords in the private and social rented sectors in relation to seeking possession without a good reason to do so. The periods of notice under section 21 and section 8 have been extended.

Do I still have to pay VAT on a commercial rental property invoice even if I have allowed my struggling tenant to defer the rent payment?

If the tenant holds a lease less than 21 years, then as per Regulation 90 of the VAT Regulations 1995 it is a continuous supply of services. VATTOS9155 states that the tax point for such supplies will be the receipt of payment or issue of a valid VAT invoice, whichever is earlier.

If you have issued a period VAT invoice under Regulation 85, 86 or 90, the tax point will be the earlier of the receipt of the payment or the time when the payment falls due. In this case, a tax point would be created each time payment is due, whether or not it is actually paid. Hence the VAT would be payable to HMRC on the due date and you would have to wait another six months to be able to recover any VAT on unpaid rent using the bad debt provisions.

A period VAT invoice is one that is issued upfront for continuous supplies covering up to a year, normally where tenants are paying via direct debit. This avoids the need to generate repetitive invoices to the same tenant. The period invoice should contain the required details and cover two or more instalments. Period VAT invoices are covered in VATTOS5220.

Remember: issuing a request for payment that falls short of being a VAT invoice does not create a tax point.