Is Buy-To-Let DEAD thanks to the Covid 19 eviction ban?

How will the tenant eviction ban affect you? And, should you be selling a buy-to-let property while the residential market is strong?

It’s no secret that the process of evicting a tenant and buy-to-let investing as a whole, has been hit hard by Covid 19 epidemic.

Since the UK (and in fact the world) came to a standstill back in March, the landscape of the UK property market has changed substantially.

Covid has seen redundancies skyrocket - unemployment estimated at 2.7 million in July - and a large percentage of tenants unable to cover their rent in full.

A pressure that’s been swiftly passed onto landlords, be they residential or commercial.

As a result, rental yields for a number of UK landlords have been slashed, with a large proportion of tenants looking for support via a repayment plan or reduced rent, and some claiming they’re unable to pay full stop.

In response, the government has recently announced this extension to its pre-existing eviction ban, first brought about in March. The move favours tenants, and is intended to protect vulnerable renters from a winter eviction as well as give them time to find their feet.

However, for many this eviction ban (labelled by the media an ‘11th hour U turn’) comes as an unwanted attack on landlords that could potentially kill the buoyancy of the buy to let market.

So, are buy to lets worth it in 2020 and the tenant eviction ban is just a temporary blip, or should you be looking at buy-to-let investing through the eyes of John Wayne - 'if the horse is dead, get off'.

What is an eviction?

Evictions are the legal process used by landlords to remove tenants from properties.

This could be because a tenant hasn’t paid rent (a common cause), is consistently late at making payment or has violated the terms of the lease (keeping unauthorized pets, for instance.) Most evictions don’t come as a surprise.

When a landlord attempts to evict a tenant it’s called ‘seeking possession’. To do so a landlord has by law to follow a procedure that includes giving a tenant written notice of when to vacate the property.

Prior to the tenant eviction ban this was usually was somewhere in the region of 2 weeks to 2 months.

It’s only when this notice expires that a landlord can apply for an Outright Possession Order – a court order that demands tenants MUST leave the property before a given date.

Typically a fortnight or month after the court hearing.

If a tenant fails to leave the property by said date, the landlord reserves the right to evict them using a ‘Warrant For Possession’, once granted by the county court.

For a tenant this is the last straw.

They will be sent an eviction notice that will outline the date for eviction. Fail to vacate the property before this date and bailiffs will be sent round to assist with the eviction and get the property cleared.

What is the coronavirus tenant eviction ban?

The coronavirus eviction ban was introduced by the government in March to lift the immediate threat of eviction for tenants during the Covid 19 period, excluding evictions brought about by antisocial behaviour and domestic abuse.

Initially, the ban ran to 25th June before being extended to August 23rd. On 20th August, the ban on evictions was extended for a second time by Housing Secretary, Robert Jenrick.

The blanket ban pushed back evictions in the UK by 4 weeks; the UK’s eviction ban is now due to end Sept 20th.

The revised blanket ban also introduces changes to notice periods, forcing landlords to up them to 6 months.

This means that no evictions will actually go ahead until around about March 2021! A lifeline for tenants, but a nightmare for landlords.

Why has the tenant eviction ban been extended?

While the welfare of tenants is the primary reason behind the eviction ban, there’s a catalogue of further reasons behind its recent extension. Here’s 3…

Extending the eviction ban gives the Government more time.

Extending the ban on evictions has been speculated to have been a tactical move by the government to, in effect buy them time to fathom possible solutions for the buy to let market post Lockdown.

Many have compared the ban to the Stamp Duty Holiday – a preventative measure to try and keep the residential sales market buoyant.

Extending the eviction ban saves social housing

It’s worth remembering the pressure that large amounts of evictions can have on social housing. With the UK already at the heart of a housing crisis, an influx of people applying for social housing is anything but ideal.

Plus, with many opting to purchase their social houses through the Right to Buy Scheme, more properties are having to be built to satisfy this demand.

Maybe this is why Boris has recently granted automatic planning permission to new build homes.

Extending the eviction ban reduces the spread of coronavirus

Maintaining good hygiene is vital for slowing the spread of coronavirus.

If evictions weren’t banned, and allowed to go ahead as usual, the levels of personal contact could rise, particularly if an eviction was in the hands of bailiffs.

So by keeping tenants housed, not only will hygiene remain good, but also the numbers of people living it rough on the streets will be significantly less – factors that could reduce the likelihood of a second wave during the winter.

What does the tenant eviction ban mean for buy to let landlords?

While the eviction ban is great news for tenants, for most buy to let landlords it’s more of a nightmare.

So that you understand why, here’s just a few potential impacts that the tenant eviction ban may have on buy-to-let landlords…

Waiting to evict unwanted tenants

The tenant eviction ban has left landlords unable to evict troublesome tenants.

A knock on effect of this could be that their properties are neglected to a larger extent and end up costing them more to put right.

Crucially, they could also miss out on attracting new tenants now that demand from tenants has rebounded strongly (Knight Frank).

Financial loss when selling

Landlords looking to sell off part of a portfolio to release equity may be severely hampered by this extension to the eviction ban.

Selling a tenanted property is no easy feat and can often limit your pool of potential buyers to investors or fellow landlords looking to upscale their portfolio.

With evictions not taking place until March 2021 at the earliest, buy to let investors who're looking to evict will not be able to take advantage of the post lockdown ‘Mini Boom’ - a knock on effect of the Stamp Duty Holiday.

As a result, when they do come to sell once their tenants are evicted, it's likely they'll achieve a lower figure because their buyer is no longer stamp duty exempt.

Equally, if a landlord wants to make an onward purchase as a result of said property sale, then they too will have to pay stamp duty. Hardly ideal when you consider that most landlords this year will see a decrease in their rental yield.

Evictions may take longer than usual

Time is another HUGE implication of the government eviction ban for any landlord looking to evict. As the ban on evictions comes to an end in September and evictions recommence next March, it’s likely that the time it takes for a tenant to be evicted will be far longer than pre Covid.

Why?

Well, with a year’s backlog of applications, the courts are going to be fully booked. Now, the government has launched 10 'Nightingale' courts to deal with this pent up demand, although many among the lettings industry do not believe it'll be enough, stating that courts already struggle with the volume of cases under 'normal' circumstances.

Landlords have to give a longer notice

The government eviction ban may also mean landlords find it harder to evict tenants in the future. If after covid, the 6 month notice periods for tenants continues, then the risk associated with buy-to-let investments is likely to increase.

As a result, it’s likely we could see more landlords cashing in their properties to invest the money elsewhere. Not good news for the buy-to-let market in the long term.

Is buy to let dead thanks to the Covid 19 tenant eviction ban?

As a landlord, this entirely depends on your individual circumstances.

On one hand, the tenant eviction ban can be considered a temporary measure to try and restrict homelessness and the spread of the coronavirus.

A survey conducted by homelessness charity, Shelter, suggested that a whopping 170,000 private tenants across the UK had been threatened with eviction by their landlord or letting agent!

So, if you’re a frustrated landlord reading this, don’t worry, you’re not on your own.

But saying that, we can see why you’re frustrated. For many of you, it can feel like the government has in fact let you cop for the majority of the costs.

You can’t quickly evict troublesome tenants, you’re having to make do with little or no rent, you’re going to find it hard to take advantage of the Stamp Duty Holiday, and yet YOU are the owner of your property.

Ask us and any landlord who is in buy-to-let market needs to seriously consider whether it's still a valid investment strategy for them.

If you have the finances to hold on to any buy-to-let investments while the tenant eviction ban is in place, we’d encourage you to do so.

After all, we won't be able to establish its full impact until it comes to an end in September and evictions get underway in March next year.

Keeping hold of your properties could well give you the upper hand.

However, if the eviction ban has you finding it hard to make ends meet and falling behind on a buy to let mortgages, we’d suggest slim lining your portfolio or selling up altogether.

Question is though, if tenanted properties are SO hard to sell, how do you find a buyer?

Well, (spoiler alert) you may have already found one…

Us. We’re a trusted house buyer who will buy any property, any condition, any location – and in case you’re wondering that includes properties with a tenant in situ!

Selling through us takes as little as just 7 days.

So come next week and you could be writing off arrears, or even viewing properties with your local agent and taking advantage of the Stamp Duty Holiday, be it through buying a new investment or an onward residential purchase.