Residential Tenancies during COVID-19 – Updated 16/4/2020
Since our last update on 3rd April 2020, the Government of Jersey has passed the COVID-19 (Residential Tenancy) (Temporary Amendment of Law) (Jersey) Regulations 2020 (the “Regulations”).The Regulations have been introduced to temporarily amend certain provisions of the Residential Tenancy (Jersey) Law 2011 (the “2011 Law”) whilst the Covid-19 crisis persists.
The Regulations came into force on 10th April 2020 and are primarily designed to safeguard tenants from eviction whilst the Covid-19 crisis continues.
The Changes
The Regulations have introduced the following key changes:
Expiration of Existing Tenancies
Firstly, the Regulations provide that where the specified term of a residential tenancy expires during the Covid-19 crisis, that tenancy will automatically convert to a periodic tenancy unless the landlord and tenant enter into a new residential tenancy agreement for a specified term or, they otherwise agree that the tenancy expires.
A periodic tenancy is one which automatically renews on the basis of recurrent period i.e. on a weekly or monthly basis.
Whilst it is therefore open to a landlord and tenant to agree that the residential tenancy has come to an end there are practical considerations which need to be borne in mind.Principal among those being that we remain in lockdown and the Government has advised that individuals should not move house during the lockdown unless such move is absolutely necessary in order to ensure the person’s health or wellbeing.
In reality therefore, it is highly unlikely that any tenant will take the risk of moving house during the currency of the lockdown particularly given the financial penalties which are being imposed by the Court for non-compliance.
Termination of Residential Tenancies by Giving Notice
Arguably, the most significant change to the 2011 Law which has been introduced by the Regulations is the removal of a landlord’s ability to terminate a residential tenancy unilaterally by the giving of a minimum of three months’ notice.
Under the Regulations, the termination of a residential tenancy can now only be achieved by the giving of notice if the tenant agrees to it.
Protection is also provided to tenants in circumstances where a landlord had issued a notice to quit to their tenant prior to the Regulations coming into force.Where such a notice to quit had already been issued, the expiration of the notice period will no longer result in the automatic termination of the residential tenancy.This protection applies regardless of whether the relevant notice period has expired.
In circumstances where the notice period is yet to expire, a tenant may give notice in writing to their landlord that they intend to remain in occupation.Where the notice period has already expired, the tenant may remain in occupation, if they are unable to vacate the property as a result of Covid-19 (i.e. due to the continuation of lock down).
In each case, the tenant would remain subject to a periodic tenancy, unless, of course agreement can otherwise be reached b3etween landlord and tenant on the basis identified above.
Provisions in Relation to Prospective Tenants
Protection is also provided for prospective tenants who find themselves in a position where they are unable to move into a property due to the fact that the existing tenant remains in occupation of the property due to the operation of the Regulations referred to above.
Where those circumstances arise:
- The landlord must inform the prospective tenant as soon as practicable that the property is no longer available;
- The landlord and prospective tenant are released from any obligations which they might owe each other under the terms of their residential tenancy agreement; and
- The landlord must reimburse the prospective tenant any deposit (or other sum) paid in order to secure the property.
The protection extended to prospective tenants applies whether or not the terms of the residential tenancy agreement have been reduced to writing and/or signed.
Suspension of Rent Increases
The Regulations provide that a landlord must not increase the rent due in respect of any residential tenancy agreement before 1st October 2020.
Any landlord who imposes a rent increase prior to 1st October 2020 shall be guilty of a criminal offence and liable to a fine of up to £10,000.00.
This prohibition applies regardless of whether:
- The landlord notified their tenant of an increase before the Regulations came into force; and/or
- The residential tenancy agreement is renewed prior to 1st October 2020 and the residential tenancy agreement includes a clause allowing for a rental increase upon renewal.
Failure to Pay Rent due to Financial Hardship
The Regulations provide that a failure to pay rent or other sums due under the terms of a residential tenancy agreement will, for the time being, no longer constitute a breach for which a landlord may apply to the Court for an eviction order.
The availability of this protection is subject to the tenant notifying their landlord, in writing, that their failure to pay arises from financial hardship caused by the Covid-19 crisis.
Whilst this protection is likely to cover the vast majority of those who fail to pay their rent in the coming months, it does not appear that the protection will extend to those who have persistently failed to pay their rent without reasonable excuse prior to the Covid-19 crisis. That said, it remains the case that the Court is not currently considering eviction applications and as such, there is frankly little that can be done, at present, to evict such tenants.
The Regulations also prevent landlords from imposing financial penalties, interest or any other fee on any rental payments, or other sums, which are not paid by the tenant (by reason of Covid-19 related financial hardship).
The Regulations will not prevent the Court from ordering a tenant to pay interest in any future proceedings if it determines that the failure to pay was not related to the Covid-19 crisis. They also confirm that a tenant will remain contractually liable to make good any shortfall of rent or other sums which are not paid to the landlord during the current crisis.
Ministerial Guidance
Finally, the Regulations provide that the Minister must issue guidance in relation to the termination of tenancies, rental payments and eviction for arrears caused by the Covid-19 outbreak.
We shall provide a further update in due course once that guidance has been issued.
As we move into the weekend we wanted to take the opportunity to provide a potentially positive update.
Extension of Mortgage Holidays
We understand that certain local banks might be starting to consider applications for mortgage holidays in respect of their buy-to-let mortgage products.
At present, this is not something which appears to have been publicly advertised by the banks and therefore landlords should make enquiries of their particular bank to see what relief, if any, is available to them.
As we near the end of the first week of Government enforced isolation, it is important to take stock of the latest measures that have been announced by the Government of Jersey, and more particularly those mentioned in Senator Mezéc’s statement on 31st March 2020.
A Message to Tenants
Helpfully, Senator Mezec’s statement includes a clear message to tenants that they should not use the Covid-19 crisis as an excuse not to meet their obligations under their residential tenancy agreements.
Indeed he encourages tenants to:
- Keep their properties in a good state of repair;
- Avoid creating problems for other tenants who are self-isolating; and
- Continue to meet their rental payments and other financial obligations under their lease whilst they remain able to do so; and
- Make immediate contact with their landlord in the event that their financial circumstances change in such a way as to affect their ability to meet their obligations under their lease.
Emergency Housing Legislation
In his recent statement, Senator Mezéc confirmed that emergency housing legislation was in the process of being drafted and would be placed before the States Assembly for debate as soon as possible.
As expected, the legislation will include provisions to prevent landlords from bringing eviction proceedings against tenants suffering financial hardship as a result of Covid-19.
It appears that the legislation will not prevent tenancies being terminated by agreement.This is interesting because it appears to fly in the face of the advice given by Senator Mezéc earlier in his statement that Islanders should not consider moving home during this time unless such a move is considered absolutely necessary on medical or personal safety grounds.
The law will also introduce an immediate suspension on rent increases, notwithstanding any contractual rights to do so contained in lease agreements.
Interestingly, there is a suggestion in Senator Mezéc’s statement that interim arrangements are in the process of being introduced to deal with claims for rental arrears and breaches of leases which are unconnected with the Covid-19 crisis.
Emergency Housing Appeal
Senator Mezéc has also appealed to landlords with residential units which are currently lying vacant to offer those units up in order to provide emergency housing to temporarily support keyworkers, homeless and vulnerable people during the crisis.
Further information can be obtained by e-mailing emergencyhousing@gov.je
The Government of Jersey announced, for the first time since World War II, an Island-wide instruction to stay at home. Whilst the Island may be on lockdown, we remain committed to providing you with the latest updates and guidance from Government and industry as to how best to protect your investments during this difficult time.
Rental Income Guarantee Cover
In our first briefing note, we highlighted the fact that landlords should look to any policy of landlord’s insurance that they hold in order to recover any lost rental payments arising from the Covid-19 crisis.
Whilst it would be prudent for landlords to refer any claims for lost rent to their insurers as soon as they arise (not least to avoid any suggestion of late notification) it is important for landlords to be aware of the current stance of UK based insurers in relation to such claims.
The UK Coronovirus Act
On 25th March 2020, the UK Government enacted the Coronavirus Act.
Amongst other things, that legislation provides that from 26th March 2020 all landlords in the UK will have to give their tenants three months’ notice if they intend to bring eviction proceedings. This means that UK landlords cannot apply to start eviction proceedings until after this three month period has passed.
In return, the UK Government has extended mortgage holiday measures to include buy-to-let mortgages, so as to, in effect, mitigate the losses that landlords would have otherwise suffered.
One major UK based provider of landlord’s insurance has today advised their customers that, in light of the extended mortgage holiday measures introduced by the UK Government, they will not be paying out on any rental guarantee policies for the next three months, as there are, in effect, no losses for their policies to answer.
The Jersey Position
The position in Jersey is, however, somewhat different.
Whilst the Government of Jersey has announced a moratorium on eviction proceedings (as in England) and has introduced measures to provide for mortgage holidays in respect of some mortgages, it has not extended those mortgage holidays to buy-to-let mortgages.
At present therefore, Jersey landlords would appear to currently be in a weaker position than their UK counterparts given that it is highly likely that UK based insurers will take the same approach to Jersey based claims against the rental guarantee provisions of their policies. This notwithstanding the fact that the Government of Jersey is yet to extend mortgage holiday measures to buy-to-let mortgages.
If Jersey based landlords are to receive the same protection as their UK counterparts it will therefore be necessary for the Government of Jersey to invite Jersey banks and lenders to extend the mortgage holiday measures to their buy-to-let customers.
Our View
Unless, and until the mortgage holiday measures are extended to buy-to-let mortgages in Jersey, Jersey based landlords should continue to make claims against their landlord insurance policies and, at least have the argument with their insurer as to whether cover should be provided in their specific circumstances.
Further Updates
We will continue to provide updates as the situation develops.
Residential Tenancies during COVID-19 – As of 27/3/2020
Since publishing our briefing note yesterday, the Government of Jersey has released further details as to the measures that will be introduced in order to protect property owners and their tenants during the Covid-19 crisis.
Protections for Property Owners
Property owners will be particularly interested to note that the Government wishes to implement measures to ensure that banks and mortgage lenders offer support to those of their customers who are experiencing financial difficulties due Covid-19.
Whilst it is not clear what form these measures will take, it is anticipated that the Government will be encouraging lenders to offer assistance in the form referred to in our briefing note yesterday.
Indeed, we are aware that certain lenders have already started to implement such measures. Barclays, for example, have contacted their residential mortgage clients by e-mail and text message inviting them to apply for mortgage holidays in respect of capital and interest repayments for up to 3 months.
Unfortunately, as presently advised we do not believe that this scheme offered by Barclays is available in relation to buy-to-let mortgages, however, it may be the scheme is extended in due course once the Government provides greater clarity as to the measures which are to be introduced.
We also understand that Skipton International are considering requests for mortgage holidays on a case-by-case basis.
We anticipate that schemes such as these will be rolled out by all of the major lenders in short order. In the meantime, you should contact your bank/mortgage provider in order to establish what assistance, if any, they are able to provide.
Protection for Residential Tenants
The Government has confirmed that they will be passing legislation in order to place the protections against eviction, which have already been extended to tenants, on a statutory footing.
As that legislation is yet to be passed, we are unable to comment on the specifics at present. However, we understand that the legislation will be aimed, primarily, at ensuring that residential tenants cannot be evicted from their properties on account of a failure to pay rent, utilities, services charges or fees which are usually paid directly to their landlord for the duration of the Covid-19 crisis.
Rent Deferral Scheme
The Government are also considering introducing a rent deferral scheme for both individuals and business tenants.
Again, the Government has not released any specific details in relation to this scheme, nor has it confirmed how it might operate, however, the name of the scheme suggests that it will likely allow tenants to defer, rather than avoid completely, rental payments etc. during the currency of the crisis. This suggests that tenants will remain contractually bound to pay any shortfall in rental payments which accrue and that landlords will be able to bring claims against their tenants for any shortfall which remains unpaid after the crisis passes.
Further Updates
We will continue to provide updates as the situation develops.
Residential Tenancies during COVID-19 – As of 25/3/2020
On 24th March the Government of Jersey announced measures to increase the protections afforded to tenants who occupy residential premises. Whilst this news will be of great comfort to tenants who are feeling the financial strain during the Covid-19 crisis, the news will not be so well received by their landlords, particularly those private landlords who rely upon their tenant’s rental payments to pay their mortgages or meet their living costs.
This week, we have had a number of enquiries from landlords seeking advice as to what they can do in order to protect their investments.
What Measures Have Been Put In Place?
Since the news was announced, the Petty Debts Court (which deals with all matters relating to residential tenancies) has announced a moratorium on the eviction of residential tenants whilst the financial effects of Covid-19 persist.
Any new proceedings issued will simply be adjourned to a future date for determination once the effects of Covid-19 have passed.
As such it will not be possible to bring proceedings against a tenant for failing to pay rent during the current crisis, even though a tenant will remain contractually bound to make such payments.
What Can Landlords Do?
Can I evict my tenant by myself?
The simple answer is no. The provisions of the Residential Tenancy (Jersey) Law 2011 (the “2011 Law”) make it quite clear that it is the Court, and the Court alone, that has the power to order the eviction of a tenant occupying a residential unit. Indeed, even where an order for eviction is made, a landlord must instruct the Viscount to give effect to that order.
A landlord cannot therefore evict a tenant, for example, removing a tenant’s belongings from the property and changing the locks.
It is important that Landlords do not resort to such self help measures during this time as the 2011 Law provides for criminal sanctions where a tenant’s rights under a residential tenancy agreement are unlawfully interfered with. In the current climate, such sanctions are likely to be imposed rigorously.
Negotiate with your tenant
Good communication between landlords and tenants is more important now that it has ever been.
If your tenant informs you that they are going to be unable to meet their rental payments due to financial difficulties caused by Covid-19, have an open and honest discussion with them. It may be that in discussing matters with them you are able to agree a reduced rental sum for the time being. It is of course better to receive some rent, than no rent at all!
If such an agreement is reached, be sure to reduce that agreement to writing. The key terms of any agreement will likely be:
- The date on which reduced rental payments will start;
- The amount of the reduced payment;
- The trigger for normal payments to resume; and
- The basis upon which the balance of any missed/ reduced rental payments are to be repaid once the crisis has passed.
Be sure to retain a copy of that agreement and any correspondence relating to it.
Landlord’s Insurance
If you have a policy of landlord’s insurance you should check its terms to see whether it provides any cover for lost rent caused by public health or pandemic issues.
Loans
In the meantime, landlords might look to alternative sources of funding in order to assist you in making your monthly mortgage repayments and meeting your income needs for the time being.
Mortgage Holidays/ Interest Only Mortgages
If the property is subject to a buy-to-let mortgage, landlords should make enquiries of their bank to see whether they are able to arrange a mortgage holiday in respect of their repayments.
Alternatively, it may be that the bank is willing to allow you to make repayments on an “interest only” basis whilst the current constraints persist.
The Future
As with all crises, this too shall pass. Unfortunately, however, it is not possible to predict when the effects of Covid-19 will pass and it is likely that the financial effects will be felt long after the virus has run its course.
Landlords should therefore start to take practical steps to ensure the that their investments are protected during these financially challenging times and begin to budget for the coming months.