Coronavirus has crashed my tenant’s business

by Readers Question

10:30 AM, 16th March 2020
About 7 months ago

Coronavirus has crashed my tenant’s business

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Coronavirus has crashed my tenant’s business

My tenant is an European national who has a holidays business across Europe. He tells me it has crashed due to Coronavirus and he is struggling to pay the rent and it is already 30% short this month. My agent has already started their automatic debt chasing process which used to include interest charges..

I give marks to the tenant for forewarning me of his predicament and explaining he has recently made a big investment that has overstretched him so he has no reserves at the moment so its back luck timing. As an aside, its a premium property and I think he should downsize but he has been there a few years now and guess he is happy there. Originally I took a risk since he was fresh from Europe with no credit rating but I think he values what he has now.

He is quite honest and has been an accidental late payer (due to funds coming from abroad) but as a landlord I like to do things by the book and keep a respectful distance and not be seen as offering favours that could count against me in court.

However, I am interested/willing offering some credit e.g. only 50% is payable for 2 months, then it rises to 100% for a couple of months and then maybe 150% for 2 months to bring the account up to date.

However, does that put me at a disadvantage if it went wrong and I pursued the Section 8 (well no Section 21 anymore) and pursed a small claims case for at least part of the outstanding? I presume the magistrate will not be too sorry for me either?

Other than getting something in writing that the agent could add to the contract, how else could I formalise this?

Or, I could play hard and use this as a reason to claim Section 8 breach now we don’t have Section 21.

What would you do?

Hardworking Landlord


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Comments

Ed Tuff

11:19 AM, 16th March 2020
About 7 months ago

I thought we still had S21 for the time being?

Ian Narbeth

11:39 AM, 16th March 2020
About 7 months ago

There are commercial and legal points to consider. In the current market, events are changing daily. Can you re-let promptly if you get the tenant out? If not, then it may be better to see if you can work things out with the tenant. Even if you can get a new tenant, will they be good for the rent or might they be affected by the COVID-19 panic? If you get possession you will be liable for Council Tax.

See what the tenant can pay and agree a revised rent holiday schedule and a repayment of arrears schedule. This should then be clearly documented. Take legal advice and check you are able to serve a s21 notice (and you have all your paperwork, GSCs, Prescribed Information forms etc. in order). One option may be to serve a s21 notice now but to say to the tenant that you will not enforce it provided the tenant abides by the new payment regime.

If there is a guarantor, make sure you include them in any agreement so that they remain bound.

Freda Blogs

12:31 PM, 16th March 2020
About 7 months ago

Consider too what the impact for you would be if all your tenants need assistance - stress test the income in case other tenants get wind of how you're assisting this guy and ask for the same concessions...

Rob Thomas

15:32 PM, 16th March 2020
About 7 months ago

If this tenant is struggling now, I wouldn't be very optimistic about his chances of surviving this crisis. Holiday businesses are going to be decimated over the next few months and the recovery may be slow but his business may never get to see the recovery if he's over-extended. I wouldn't offer a rent holiday as it could turn into a really long holiday. Better to look for another tenant than have what could turn into a non-paying tenant.


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