Coronavirus Update #1 For Landlords: Toilet Roll Will NOT Save You. This Will!


RGI Vs Toilet Roll / Coronavirus

Besides from tragic loss of life and the rise of the bog-roll foot soldiers, another tragic consequence of the coronavirus is the global financial devastation it’s causing, from the bottom to the top middle.

People say that socialism doesn’t work, which might be true, but equally, a system that is designed to starve out the less fortunate first is not a working solution either. That’s what is happening, and it’s going to continue.

Cororavirus is going to impact every single business one way or another, either directly or indirectly, through the virus or through fear.

So I can’t be the only landlord concerned about the possibility of the coronavirus pandemic causing an increasing chance of eventual mass rent arrears, and therefore contemplating whether it’s time we started engaging in combat over Rent Guarantee Insurance (RGI) products, like normal civilians are doing over bog-roll? Ya’ know, just in case.

I honestly don’t know the answer.

I’m just asking the question and interested in your thoughts.

I want to know whether you’re concerned about how the coronavirus may impact your BTL business, and specifically how it might impact your tenant’s ability to pay rent? If so, have you taken or considered taking proactive steps to mitigate potential damages?

I certainly have.

It’s profoundly batshit crazy out there!

I went into my local Tescos Superstore last night; the toilet roll and pasta isles were both decimated wastelands. Literally, not a single loose penne tube in sight, not even a random stowaway. The tinned tuna isle was noticeably sparse, too.

When I walked into my gym the other day, I caught eye of a comically distressing notice on the reception desk, warning all members that if anyone is caught stealing bog-rolls from the vicinity, they will receive a lifetime ban. Apparently some numpty was caught trying to smuggle away a gym-bag full of the stuff.

What-the-actual-F?! These apocalyptic-dummies have lost their loopy marbles.

Moreover, the circulating video clips of assholes physically scrambling over household supplies in grocery stores is a reminder of how little we have evolved as a species, and how similar (and basic) our human genomes still are to chimps.

Embarrassing.

Whether it’s justified or not, the irony is, fear could create bigger problems than the coronavirus itself. I’m actually starting to wonder which virus poses the most danger, human nature or COVID-19.

Rent Guarantee Insurance (RGI) is always sensible, but is it more so now?

I’ve ALWAYS endorsed splashing out on RGI cover, specifically for new tenants. I tend to push it less when a landlord has developed a healthy relationship with a tenant that’s proven to be reliable, and in those instances I have no issues with allowing the policies to lapse. Renewing them is cool, too.

However, those principles don’t seem to apply right now, because mass-scale panic plays havoc with rationality, so now, not only do we have to protect ourselves against a deadly virus, but arguably the bigger threat: crazy.

The stats imply that there are already circulating viruses that could just as easily take us out before coronavirus, but they’re currently far less damaging because they’re not being marketed by a tsunami of panic and hysteria. Exhibit A: the empty shelves.

My point is, whether people are overreacting or not is irrelevant, because people ARE worried, and fear inevitably breeds more fear, and that’s causing less consumer activity, which is causing loss of earnings. That’s going to affect landlords all over the world, even if the virus doesn’t.

I literally experienced one short flurry of coughs this morning, and that was enough for me to start questioning my seemingly failing health, and commence with self-diagnosing on Google (literally, the worst way to self-diagnose any ailment if you want to retain your sanity).

Apparently my symptoms indicate that I could have cancer, herpes, a verruca, a cold, the flu, coronavirus, unknowingly lost a kidney, or I may have just swallowed too much air. Either way, it’s best you don’t touch me. Verrucas are nasty and super contagious.

That’s the kind of shit which is going to cause much of the damage. Psychological warfare. And hypochondria.

Planning for the worst… today!

Landlords should always protect themselves against unforeseen circumstances, and new events shouldn’t suddenly invoke sensible measures to limit damage control.

But the reality is, some of us will need to tighten up our ships due to the heightened level of risk and insanity we’re being exposed to. I suspect the internal organs of the rental market are going to start shutting down, if they haven’t done so already.

Will coronavirus affect your BTL business?

I don’t know. It’s likely.

Will it be as big as people fear?

I don’t know.

But what I do know is that the fear is real.

The true result is unknown, but some people seem to be anticipating the end of the world, and they’ve managed to find comfort and reassurance in stock-piling tools that keep their asses polished as part of an overall solution for the survival of mankind. It’s an interesting tactic, but I certainly won’t be participating. I have leaves in my garden. Lots of them!

This isn’t the end of the world, and much of what our lives look like after we get through this will depend on what we do now. It doesn’t matter how much bog-roll you have stored in your loft, it will not change your future in any meaningful way.

Whether you’re going about your day as normal (but taking a few extra precautions), or you’re a lunatic, smashing peoples teeth out of their ears over the last bottle of hand sanitiser gel, the cost of waiting to administer reasonable defences is often the most expensive route, and it’s usually those that don’t prepare for the things that matter whom are left the most vulnerable.

Probably the biggest mistake, we as professional landlords (that includes EVERY single one of you, from single to portfolio), can make is to remain idle, be complacent, and shake our tenant’s filthy rotten fungus hands.

Incidentally, as I’m writing this, I’m also listening to Sky News live. Dr Michael J Ryan, the Chief Executive Director of the WHO Health Emergencies Programme, just responded with the following when asked what lessons were learnt from previous outbreaks, which can be applied to dealing with coronvirus:

‘speed’ trumps ‘perfection’

the greatest error is not to move

I’m not saying we should panic.

I’m not saying everyone should rush out and scramble for RGI policies – that may NOT be a solution for you – that’s merely a solution that quickly came to my mind, for me. I think it’s far more critical to stress-test the consequences of rent arrears for you today and then plan accordingly. Will you be able to manage? If not, what practical steps can you make today to plug the holes? Essentially, do everything sensible landlords should be doing anyways.

Personally, I think guaranteeing rent is an obvious precaution to take, but not the only one.

Coronavirus damage control: precautions that come to mind!

I imagine a market slowdown is imminent, although I can’t be certain. So I want to emphasise the fact that this exercise is about anticipating likely dangers and preparing, nothing else. I’m not trying to quantify the scale of the problem for today or tomorrow.

  • 1) Build a cash reserve (if you don’t have one already)

    For most it’s probably too late, but if there’s any opportunity to build a cash reserve in the coming weeks and months, do it!

    Pile it up, pile it good!

    You really should have had one already. You know that.

  • 2) Rent Guarantee Insurance (RGI)

    I haven’t reduced myself to joining the penne pasta and bog-roll looters (yet), but it could be fair to label me as an RGI bandit. I snapped up a few policies, and no one could have stopped me even if they tried.

    Back off
    BACK OFF, BARBARA!!! Get any closer to me or my policy and I will hang your intestines around my neck like a 9 carat chain! DO NOT TEST ME, PENIS-BREATH!!! I WILL DISARM YOU AND GUT YOU LIKE A TROUT!

    I don’t know if it will happen – and I don’t wish to cause any panic – but I wouldn’t be surprised if RGI products start becoming more restrictive and/or being pulled off the shelves, because I suspect insurers may anticipate a surge in claims. Most travel insurance policies have already become limited, restrictive and more expensive, and I also heard that wedding insurance is near impossible to purchase now.

    Here are a couple of options if anyone is interested in becoming an RGI bandit, too:

    SupplierRatingPriceDetails
    Rating

    4.7

    TrustPilot Reviews
    Price
    £139.99Inc VAT
    details

    • Covers Legal Expenses & Rent Guarantee
    • Maximum of £25,000 per claim
    • Options for 6 or 12 months’ cover (£139.99 is for 12 months cover)
    • Maximum Rental Amount per month is £3,000 for up to 6 months or £15,000 (whichever is the lesser amount)
    • No excess to pay (option available to pay less for a policy subject to excess fees)
    More Info
    Rating

    4.2

    Facebook Reviews
    Price
    £139.99Inc VAT
    details

    • Covers Legal Expenses & Rent Guarantee
    • Options for 6 or 12 months’ cover (£139.99 is for 12 months cover)
    • Covers up to a maximum of £3,000 per month
    • No excess to pay (option available to pay less for a policy subject to excess fees)
    More Info

    Usually, to qualify for RGI, your tenant will need a guarantor and they both would need to have passed or will need to pass credit checks.

    RGI is generally designed to protect landlords against “bad tenants” that fall into arrears, so claims against tenants that lose their job or take a reduction in hours (either due to less work being available or self-isolation) could be denied. However, while it’s likely that many will be financially impacted by coronavirus, that doesn’t have to be the exclusive reason for rent arrears.

    I don’t really understand how and where the underwriters would draw the line, because someone that falls into arrears is technically a “bad tenant” for any landlord.

    In any case, I personally opted for RGI on the basis that it *might* cover me if my tenant loses their job, and then refuses (or can’t) pay rent. Many tenants seem to miraculously go radio silent when they fall into arrears, so we usually don’t even know ‘why’ it’s happened, we just know it has. Again, I have no idea on what basis an underwriter could refute that claim. Although, I’m sure they’ll manage somehow. They often do.

    RGI is not a bullet-proof solution, but I think it’s relatively cheap enough to make sense. However, I think it’s much more important to have your finances/cashflow in order. However, RGI does increase the chances of recovering losses for relatively little money, in my opinion. “Speed trumps perfection”, innit?

    I’ve successfully made claims in the past.

    If you do grab a policy or twenty, please ensure every detail on each policy is accurate so your claims can’t be rejected. If there is ANYTHING you are unsure about (e.g. what you can and can’t claim for), contact the policy provider, and if needs be, get them to provide you with written confirmation of details that could get scrutinised in the future.

  • 3) Talk to your mortgage lender

    If you’re particularly concerned, which I imagine some of you will be, I recommend finding out if your lender has put any emergency measures in place. Some are offering ‘mortgage holidays’ and additional breaks and support for those facing financial difficulties.

    If, for example, your tenant is financially impacted and has openly disclosed that they’re concerned about making rent, notify your lender immediately. Royal Bank of Scotland (RBS) and Natwest, among others, have said they will offer repayment deferral for up to three months. If you qualify, you can then pass on the savings to your tenant by temporarily reducing rent. If your cold, black heart wants, that is.

  • 4) Temporary rent change

    Part of minimising the damage to cash flow may include temporarily reducing your tenant’s rent. Under these circumstances, it’s likely that landlords could end up lowering rates for those hit by financial losses, whether it be on the basis of a gifted discount, or a debt to be repaid in the future.

    I reached out to the super helpful and knowledgeable Adrian from the Guild of Residential Landlords, and asked him what the best way is to enforce a temporary rent change. Here’s what he had to say:

    Temporary rent change process

    *slaps forehead* I called him Andrian!

    He didn’t flinch, though. What a good sport.

    If you amend the rent, make sure you send written notice, and specify how long it’s for. The concern here is that if the amendment isn’t properly documented, your tenant may runaway with the reduced rent amount indefinitely. Remember, people are scared, so they’re acting bloody nuts right now.

    Update: some people have rightly asked what the implications of lowering the rent in regards to the tenancy deposit legislation, specifically because of the Tenant Fee Act, which limits landlords in England to take a maximum of 5 weeks’ worth of rent for the deposit. Annoying.

    Honestly, I don’t know how lowering the rent will conflict with the deposit legislation, but because this is such an unprecedented scenario, I can’t imagine anyone will suffer from legal implications for lowering the rent to help tenants that have fallen victim financially due to the coronavirus (or any other circumstance). It would be absurd if they did! But obviously that’s just my hunch.

    I personally would not hesitate, but I would make sure I get written proof from the tenant that they have been impacted by loss of earnings, and as said, document any new arrangements.

    It might also be worth seeking advice from the tenancy deposit scheme you have secured the deposit with.

  • 5) Allow tenancies to become periodic

    I actually always allow my tenancies to roll onto a periodic agreement and I leave them that way until the end of time. I prefer the flexibility, it’s beautiful.

    If you prefer choking and locking down your tenants for security purposes, I would personally hold-fire until the economy is revived and stable.

  • 6) Maximum 6 month period for new tenancies

    If you’re in the process of starting a new AST, consider making the fixed term for the minimum amount permitted, which is 6 months. Again, this is normal practice for me. I can’t remember the last time I dished out a 6+ month tenancy to a stranger.

  • 7) Hold onto imperfect tenants, for now

    In times of difficulty we often have to make sacrifices and decisions that aren’t ideal.

    I’m not necessarily saying hold onto diabolically evil tenants, but I am saying that if you face a situation whereby you’re considering serving notice to your tenant because of their marginal misconduct (e.g. if they called your Nan a hairy-back Mary), you may want to consider whether 1) trying to find replacement tenants right now will be fruitful 2) whether you can grin and bear the displeasure for a tad longer.

    Suffice to say, I know how soul-destroying dip-shit tenants can be, and on occasions I would have preferred to grapple with large void periods and cough up the associated expenses, rather than deal with their crap for a second longer. But that’s not usually a financially viable option.

    It seems logical to me that people will be more inclined to stay put for now, which means less movement, and that will impact the rate of new tenancy enquiries. That’s something to bear in mind, definitely.

    Again, exercise common sense with this one, dummy.

  • 8) If you’re currently looking for new tenants!

    Sheeesh kebab-me-in-the-ass, talk about mother of bad timing. I feel for you.

    If you’re finding it tough, under no circumstances take any shortcuts out of desperation. Stay true to a vigilant and thorough referencing process. Even in times of crisis there are opportunists out there looking to take advantage of nervous landlords.

    These are the same mules walking out of shops with sacks full of hand sanitisers so they can flog them on ebay and street corners for stupid money.

    Ironically, “GET A REAL JOB, ASSHOLE”

    Ahhh, how many landlords have heard that before? Classic.

    Do not allow a rodent to slip through the net. Drug dealers are still dealing, and looters are still looting, and I’m sure there are scumbags out there diluting bottles of sanitizer with donkey piss to increase profit margins.

    You may, however, want to consider slightly lowering your asking price to help boost interest. Remember, it’s usually always more cost-effective to reduce the asking price if it helps speed up the process, as opposed to leaving the property vacant for prolonged periods of time before eventually getting the full asking price.

    Update: if you’re stuck in this unpleasant little boat, I’ve thrown a blog post together on how I would find tenants during the coronavirus lockdown. I hope it helps.

  • 9) If your tenant is due to leave soon!

    If your tenant is scheduled to leave in the coming weeks or even months, I would get in touch with them to find out if they still plan on vacating.

    If they are, you may want to encourage them to remain longer due to the circumstances (if you want them to stay on, that is). You could consider cutting them a deal if you think it’s necessary, or mentally torment them by reminding them how dangerous it is out there at the moment. Don’t forget to document any arrangements.

    I’m sure with all the fear and self-isolating, plans are changing all over the shop.

  • 10) The cost of vacant properties

    This definitely isn’t a rule of thumb by any stretch, but it’s worth keeping in mind that trying to help affected tenants remain in situ might be cheaper in the longer run:

    • As already covered, the market might be less active right now, but also;
    • there are costs associated to finding new tenants;
    • most building insurance policies will not cover properties that remain vacant for 30+ days unless a separate unoccupied home insurance policy is taken out;
    • the landlord will be liable for the council tax during the vacant period. Some local councils do offer discounts and exemption during vacant periods, but it’s becoming less common. You should contact your local council to find out if your property is entitled to any breaks.
  • 11) Holiday/Short-let/Airbnb tenancies!

    I didn’t originally contemplate the devastation the coronavirus would have on the short-let market, my head was too far up my own ass, focusing purely on regular ASTs. But thanks to a comment from Owen (comment #5), I was reminded and enlightened.

    Since most short-let/airbnb lets are occupied by holiday-makers, it’s the end of the market that’s feeling the immense force of the pandemic right now.

    Owen, who has a short-let holiday home, is contemplating the idea of converting his property into a regular AST and renting it out at below cost.

    I think that’s a sensible plan worth considering since I don’t see the tourism and travel industry recovering anytime soon.

  • 12) Reassure your tenants, perhaps

    If you have nice tenants…

    Landlord coronavirus tweet

    My only concern is, encouraging arrears and discounts. I don’t think we should be doing that, only assisting those in turmoil. I could only send out a message of that nature to the tenants that I can trust not to abuse the sentiment. Reach out to the wrong type of person and you’ll get pushed over a cliff. So careful on the trigger, cowboy/girl!

    In any case, clearly wonderful and greatful individuals.

Other than that, I’m sure the government will introduce further measures in due time to assist with the financial woes, at which point I’ll do my utmost to keep you updated.

Just to be clear, I’m not advising anyone on how lenient they should or shouldn’t be as a landlord, I’m just covering a few likely scenarios, and looking at every situation objectively and brainstorming precautions and solutions. I know some of you gagged and vomited at the thought of lowering rent and offering discounts, ’cause presumably the fuel for your Range Rovers’ won’t pay for itself, virus or no virus. Relax, believe you me, I understand. My Cuban cigar tray is due a refill.

You may or may not be able to relate or agree with any of my thoughts, which is fine. The main objective is to encourage everyone to plan accordingly and put into place their own defences.

What if your tenant can’t pay rent because of the coronavirus?

First and foremost, as I said, talk to your mortgage lender to find out if they will temporarily defer your payments.

Beyond that, this is a tough one, and there is no right answer. At least, I can’t offer you one.

On one [sanitised] hand, self-preservation is important, so we still need to practise pragmatism and consider what’s best for ourselves. On the other [sanitised] hand, we’re in this together, and it’s in moments like these that acts of kindness are essential.

What I will say is the following (which isn’t exclusive to coronavirus victims, it’s based on nothing other than my own personal moral and ethical beliefs, which I wouldn’t dare enforce upon you):

  • As always, try to be empathetic and help how you can, but don’t put yourself in a dire position by doing so.

    Compromising your own position financially to help others may seem noble on the surface, but the reality is, it’s only multiplying the problem. That’s why I’ve never understood the irrational and critical backlash landlords receive from the public when we evict tenants that are facing hardship. Apparently, in their futile minds, it’s better to have two people struggling financially than one.

    Shit-for-brains.

    Yes, there are plenty of horror stories of brutal landlords mistreating tenants, but equally, there isn’t a shortage of stories about landlords being far too lenient and getting financially demolished by piss-taking tenants either.

    Do what you can to help, no more.

  • Not only is it our tenant’s responsibility to pay rent, but it’s also our responsibility, as landlords, to be stable and organised, so we can help our tenant’s endure their tough times (to a certain degree).

Now back to you. Are you concerned, and have you taken any extra precautions due to coronavirus?

Finally, I want to share the same sentiments as per my recent newsletters, and that is to wish you and all your loved ones’ good health!

Please remain rational, safe, sterile, and securely cover your dirty little piehole when coughing or sneezing in public xo

Coronavirus: what you need to do!

56 Comments- Join The Conversation...

Showing 6 - 56 comments (out of 56)
The Landlord Avatar
The Landlord 16th March, 2020 @ 10:36

Thanks @Owen, appreciate it.

God, I didn't even think about the short-let/airbnb industry. I can only imagine how many bookings are being cancelled.

If I were you, I would do exactly that - lower the rate and convert it into a regular AST to offset some of the losses.

If you do decide to do that, please keep us updated. I'm sure many people will be in the same boat, and perhaps will be thinking of doing the same.

Best of luck!

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ARO 16th March, 2020 @ 10:38

Thanks so much for this blog. Quick Q on rent insurance. Do they apply to HMOs and what if the rental income is above the £3k threshold?

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Tony 16th March, 2020 @ 10:40

Hi, thanks for this timely post. Our perfect tenant of 5 years works in the air travel industry which is being absolutely hammered by the virus, and she's quite likely facing unpaid leave or worse, and we've been wondering what we can do to provide relief for her without accidentally shooting ourselves in the foot. Will look at the temporary rent change option, but do you know if this would invalidate the deposit (as that's based on a multiple of the weekly rent)?

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Paul 16th March, 2020 @ 10:48

Great article but, has anyone thought of the issue with the insurers claiming "hand of god"?
Some insurance providers get out of paying if the issue is caused by an uncontrollable force such as damage to property from strong winds.

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The Landlord Avatar
The Landlord 16th March, 2020 @ 10:51

@ARO
I believe you can get RGI for HMO's, but I didn't specifically look into them (I don't have any HMOs).

I would just call a RGI supplier and see what they have available.

If you decide to do that, please let me know how you get on!

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Deana Smith 16th March, 2020 @ 10:51

Brilliant. Going through it with some tricky tenant stuff. This brightened my day.

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The Landlord Avatar
The Landlord 16th March, 2020 @ 10:53

@Paul,

My understanding is that it's irrelevant for RGI. The landlord is covered from rent arrears, I don't think it matters *why* the tenant falls into arrears. Again, that's my understanding!

Also, does this count as "hand of God"?

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Teresa 16th March, 2020 @ 10:53

Great info with sound advice as always thank you.

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Josephine 16th March, 2020 @ 10:56

If a tenant is on a periodic contract ie one month notice is it the case that the rent guarentee only covers the period between the tenant stopped paying, the serving of the 21 notice and the time the tenant left ie no rent guarentee would let a landlord leave the tenant in place for say six months without him/her being able to pay rent?

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The Landlord Avatar
The Landlord 16th March, 2020 @ 11:01

@Tony
Ahh, really sorry to hear that.

I live near Stansted, and many of the airline staff rent in the local area, so I know a lot of landlords will be facing the same issue as you.

Honestly, I really don't know how lowering the rent will conflict with the deposit legislation, but because this is such an unprecedented scenario, I can't imagine anyone will suffer legal implications for lowering the rent to help tenants that have fallen victim financially due to the coronavirus. It would be absurd if they did! But obviously that's just my hunch.

I personally would not hesitate, but I would make sure I get written proof from the tenant that they have been impacted by loss of earnings, and as said, document any new arrangements.

It might also be worth seeking advice from the tenancy deposit scheme you have secured your deposit with.

Best of luck, Tony!

15
The Landlord Avatar
The Landlord 16th March, 2020 @ 11:09

@Josephine
Good question!

If your tenancy is already in a periodic tenancy, it does not result in a new tenancy each period, despite popular belief. It's a single ongoing tenancy, as per this article on landlordzone.

It might be more difficult, but you can get RGI for periodic tenancies that covers 6 - 12 months.

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Tony 16th March, 2020 @ 11:18

@landlord Thanks, you too, keep up the good work!

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Maureen McMahon 16th March, 2020 @ 11:31

Here's an even more ridiculous situation. I am a pensioner being evicted on April 15th through an s21 no-fault eviction following a problem-free 24-year tenancy. I have not been able to find accommodation because my rent is paid by housing benefit. Landlords don't seem to understand that people receiving guaranteed pension credit receive full housing benefit paid regularly for the next hundred years should they live that long. This section of the population is in no danger of getting into rent arrears because of the coronavirus. These payments are protected so any landlord lucky enough to get a pensioner as a tenant is home free financially. Today I called an agency about renting a flat which I liked, was within the rent amount paid for me (£1150 PCM)plus deposit if requested. I was told by the agency that the landlord has said that they would rather leave the place empty than take on anybody who is receiving housing benefit. Is everybody going mad? I was trying to appeal to them as a business and point out the advantages of having me as a tenant in this time of crisis. But the blinkers are on, as well as the masks. I am a potential saviour of somebody's landlord business and they are too afraid and blind to be able to take advantage of that. I also work as a translator English/German when my life is not on hold because of eviction by a multi-millionaire.
Maureen

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Mixie 16th March, 2020 @ 12:01

Thanks for the publishing this blog Landlord and as always delivered with great humour! If laughter is the best medicine this certainly helps!

Stay well and safe : )

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John 16th March, 2020 @ 12:03

Regarding your Blog on Rent Guarantee Insurance I feel on this occasion you have read it wrong.

Insurance is designed to help with the few per cent of occurrences of default in normal life.

It is not designed for circumstances where many more people than usual are impacted , hence exclusions for war and act of god etc. This event certainly classifies as Act of God if anything ever did.

The Insurance Companies will be the first to go bust early doors if they start paying out on these claims. There will be no RGI going forward and if you have it now I seriously doubt it will be able to pay out.

Help your tenants wherever possible and consider , Is it better to have a tenanted property being occupied by someone who just may protect it, or an empty property? Your tenant may just appreciate your help and stick with you if we all get through this.

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Steve 16th March, 2020 @ 12:14

Good post as ever, keep it up.
Sorry to point it out but a little typo lept out at me in your disclaimer probably of no consequence but...
"and should never be contrued as legal or professional advice.
.
Should be 'construed'.

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The Landlord Avatar
The Landlord 16th March, 2020 @ 12:15

@john,

I think insurance is based more on probability (could be wrong). Out of X amount, they expect only X amount to claim in normal life.

Travel insurance companies were legally obligated to cover travellers that were impacted, that's why they started amending and removing the products from the shelves. Presumably, if it was an act of God, they wouldn't have been obligated to provide cover.

If you buy a travel insurance policy *now*, you're very unlikely to be covered by any impact from coronavirus because policies have been amended.

I spoke to my RGI policy provider that they said if my tenant falls into arrears, they will cover losses. But the landlord will need to serve notice, to show they are making reasonable efforts to remove the tenant.

Many thanks.

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The Landlord Avatar
The Landlord 16th March, 2020 @ 12:15

@Steve,
Thank you :)

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tony edwards 16th March, 2020 @ 12:27

My 5 residents share facilities with me, expecting the one who works in a Chinese restaurant at least will be on short time. I will let them use deposits to cover rent and then have arrears 'loans'interest at the same rate the bank pays me. Fortunately all good people and I have substantial cash reserve. Feel for those less well placed renting or letting. We live in profligate debt fuelled society with a virtual reality currency. No need to worry the central bank will magic money with non existent value to cover whatever happens...for the corrupt casino financial system; strange there are always billions to be found for nuclear submarines that can never be used :-)

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Denise 16th March, 2020 @ 12:59

like you we have tended to let RGI go after a year or so and so we now have at least 3 potentially dodgy tenancies where our tenants are very probably working Zero Hours contracts, on minimum wage.
I just called Discount Landlords - and spoke with a very honest and straightforward chap who advised me that RGI - from any company - will only cover a tenant 'maliciously' deciding to stop paying their rent, NOT one who can't pay because they are unwell.

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The Landlord Avatar
The Landlord 16th March, 2020 @ 13:05

@Denise
Thanks for the update.

I didn't necessarily get RGI for those unwell, but more so to protect myself against loss of income due to job losses. Bear in mind, it also covers legal expenses.

RGI won't cover everything, I understand that. But I have claimed a few years ago, with HomeLet (another RGI company), because my tenant lost their job and refused/couldn't pay rent.

I think there's a fine line between being unable to pay rent and maliciously refusing to pay rent, and I'm not sure how you'd prove which is the case. I could just argue that even though my tenant has lost their job, they're still maliciously refusing to pay rent. I've actually had tenants claim to have lost their jobs and refuse to pay rent, but they hadn't even lost their job!

At least with RGI, I have a chance of reclaiming.

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The Landlord Avatar
The Landlord 16th March, 2020 @ 13:15

@tony edwards
Ha, yup, you can bet your house on the fact that the government will miraculously find mountains full of money when it comes to nuclear submarines, and a bullet train that gets rich business men from the South of England to the North 20mins quicker than currently possible.

Meanwhile, ventilators are sparse.

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Phil 16th March, 2020 @ 14:16

An interesting blog. I tend to agree with John's assessment of the situation regarding the value of RGI being questionable or even enforceable in the present scenario. It could be good money after bad? Or you could end up with legal fees chasing a tenant and also the RGI company for non payment.

Another issue to consider is that in some council areas, when the rental property is empty (for whatever reason) the landlord becomes liable to cover the Council Tax which is about to increase again. I would be surprised to see any concessions from the council towards the landlord. I am thinking that it is better to try and help affected tenants remain in situ and minimize any consequential legal costs and liabilities. Notwithstanding the respect and my natural empathy for my existing tenants.

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The Landlord 16th March, 2020 @ 14:27

@Phil,
I think there's two likely scenarios for which to make a claim:

1) If the tenant is self-isolating and has to take time off work and is unable to pay rent
2) If the tenant loses their job, or has less hours, and is unable to pay rent

I think if the tenant is self-isolating, it might be difficult to make a claim.

But my other thought is, how can insurers know what is actually happening? While it's likely that many will lose their job, or at least take a drop in hours/salary, the coronavirus doesn't have to be the exclusive reason for someone losing their job, or refusing to pay rent.

I don't really understand how and where they would draw the line.

Also, when tenants stop paying rent, they often go radio silent. So landlords often don't know why.

I personally opted for RGI on the basis that it *might* cover me if my tenant loses their job, and then refuses (or can't) pay rent, not necessarily because they have to self-isolate because of the virus.

As said, RGI is not a bullet-proof solution, and it's by no means more important than managing cashflow, but it's something that may help.

Really good point about council tax, never thought about that. Also, you just reminded me, that most building insurance policies don't provide cover if the property is vacant for 30+ days unless a separate "unoccupied property" policy is taken out. That's also going to cause issues. I'll update my blog post accordingly.

Thanks, Phil!

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Cyril 16th March, 2020 @ 15:20

Always a useful and humorous blog. Like many others I am worried about keeping up BTL payments if the Coronavirus impacts tenants jobs and income, resulting in unpaid rents. I run 3 HMOs with 13 residents, so a couple of empty rooms from time to time are manageable, but add 2 or 3 rent defaulters and I could be in trouble if the crisis goes on any longer than 3-4 months. I cannot decide whether to raise my concerns with my mortgage provider to see whether they have it in mind to allow mortgage payment deferment in the short-term. If they do not do something like that I can see literally hundreds of landlords being forced to sell and with the glut in the market this could cause, prices might drop like a stone. By the way, the earlier commentator who pointed out your typo and said it "lept" out at him, was guilty of a similar omission. I bet this post is now being closely scrutinised.

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The Landlord 16th March, 2020 @ 15:36

Thanks @Cyril!

If anything I think this blog post is making landlords feel more comfortable, because it's clearly a mass-scale concern, which could impact all of us. We're in this together!

My assumption is that HMO landlords are generally less vulnerable, because you're not relying on one or two breadwinners. The risk is spread.

However, completely appreciate your concern.

Many of the mortgage lenders have published press releases, so I would go onto your lenders' website first, they may have published something. If not, I would definitely contact them to find out if they have any measures in place, just so you know what you're potentially up against sooner rather than later.

Best of luck!

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jensur1 16th March, 2020 @ 18:30

Thanks for Blog, still unsure what the problem is. As I see it the only problem is that anyone with a pre-existing health problem ( obesity. hypertension, diabetes, COAD drinking etc etc ,may have severe illness/death , the fact that it is affecting the over 70's more than anyone else is because they have more health problems than the rest of the population. All other problems - close down of communities manufacturing, travel bans etc are of our own making.
The main shortages in my supermarket ,and the world, is shortage of common sense.

I really hope I do get it now, in my late sixties, whilst my immune system can kick it off, rather than in the future when I have a health problem.

As to my tenants:- I will support them in any way possible, if I take a financial hit then so be it, although I do realise that not everyone has a stable financial situation.

Also what is happening to all the money that is no longer being spent (wasted) on eating out and entertainment and travel. Is it too much to hope that some people will pay off their debts and help themselves in the future - we can only hope.

Keep safe be kind.

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Paul Barrett 17th March, 2020 @ 06:14

@ the landlord

Unfortunately whilst your suggestion that obtaining RGI is a very effective solution to problem tenants who default on rent for whatever reason very few tenants or any possible guarantor are capable of qualifying for RGI.

I have always wished to have RGI on my tenants.
Apart from one of them in 10 years none of my other tenants qualified for RGI nor was I able to source a guarantor for them that would qualify for it.

The one tenant I did manage to obtain RGI for ended up costing the RGI company £10000 after I had to submit a claim!!

Rent defaulting tenants cost LL over £9 billion per year in losses mostly caused by rent defaulting.
It is therefore no surprise that the underwriting criteria for RGI is necessarily onerous!!
£9 billion of losses would make a severe dent in the profits of Lloyds of London!!

Of course onerous RGI underwriting criteria wouldn't be so much if the eviction process was speeded up to evict tenants the day after the 2nd month rent default which would be 1 month and one day.
Without requiring CC actions.

This latest CV19 is just the latest risk that proves how risky it is being a LL especially a leveraged LL.

With a mortgage to service RGI is an essential but few LL can achieve it on their tenants.
The fact is the credit quality of tenants is very poor and few will ever qualify for RGI.

Few LL ever consider what happens if rent isn't paid for whatever reason.
LL with unmortgaged properties can be more resilient as no mortgage is there to be paid.
Just means the LL might have to cancel that holiday to the Maldives!!

Very few LL can afford to pay a BTL mortgage without rent.
Being a LL without RGI is a financially very risky business.

Those LL who have HB tenants have no guarantee they will ve paid and as such those sort of LL have low rent paying tenants.

If that is the business model the LL wishes to use then fair enough.
But being a HB LL is fraught with difficulties ESPECIALLY since UC was introduced.

RGI whilst a brilliantly effective product is rarely achievable on a LL tenants.

This leaves the LL with the risks of rent defaulting tenants.
Bankruptcy could visit the LL very quickly!!

This is why I am getting out of AST lettings as well as all the other reasons like S21 and S24 etc.
I'm selling up and would like to buy a 4 bed house so I can take in lodgers and not need a HMO Mandatory Licence.

If I can't afford a 4 bed house I will try for a smaller property but still take in lodgers.

But that is a long way off.
It will take about 4 years to get out of the PRS TOTALLY.

Lodgers won't need RGI as it is easy to get rid of rent defaulting lodgers.

So to sum up your RGI suggestion is a great one.
Just in practice few LL can achieve it.

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The Landlord 17th March, 2020 @ 10:06

@Paul,
I'm surprised you've found it so difficult to get RGI. I've never really had any problems. But then again, I don't accept tenants that don't pass referencing/credit checks and don't have a qualified guarantor. Maybe you need to be more stringent with your applicants?

I've even managed to get cover for a housing benefit tenant and make a claim. Although, I'm not sure how likely that is anymore! It was several years ago.

Sounds like the one time you did claim it really paid off! £10,000, wooooosh! If that isn't an advert for RGI (and better referencing hah), then I don't know what it is!

Yup, it's getting tough out there, and this coronavirus is only going to make it more difficult for the entire industry.

Time will tell.

Best of luck Paul, and stay safe!

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The Landlord 17th March, 2020 @ 10:11

@jensur1
Haha, yup, common sense seems to have been thrown out the window. I've heard a number of leading manufacturers say that there is no problem in our supply chain, and there is enough food and bogroll for everyone. But people are still going nuts and stockpiling! We really are creating much of the problems for ourselves.

We all know the virus is a big issue, no one is disputing that, but people just need to remain calm.

Many thanks, you too!

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Graham Ireland 17th March, 2020 @ 10:23

Another legal angle on this problem. One of my tenants is claiming to be isolated but that is not the problem his house is due to be gas certificated and in current circumstances that may be impossible to do for a while. This of course would leave me breaking the law any idea how this might be treated by the authorities whose personnel don't give a damn what your excuse might be? Jobsworths!!!

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The Landlord 17th March, 2020 @ 10:38

@Graham
I don't think you need to be concerned about that.

If a landlord can prove that they have made all reasonable efforts to enter the property to carry out essential repairs/maintenance, and the tenant refuses entry, the landlord is not held responsible.

That has always been the case. However, I think they'll be extra understanding if someone is self-isolating right now.

Just make sure you keep all correspondence on record, so you can prove the reason for why you had to delay the inspection.

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Nicola 17th March, 2020 @ 12:26

Thank you for another great post. You make me laugh.
The comments are interesting too, thank you all.

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Gareth 18th March, 2020 @ 10:40

I have looked into RGI and have come up against a couple of stumbling blocks:-
1/. From the insurers I have spoken with (that's about 4), only tenants who have just occupied the property are covered. For any existing tenants there is a 90 exclusion on the policy. Given I would be tasking out RGI for the principle purpose of safeguarding against rent default due to coronavirus, that 90 day exclusion would be during the time the insurance would most likely be needed.
2/. Some insurers will only pay out if for example 2 months have defaulted AND the landlord have commenced legal proceedings to evict the tenants. If I couldn't see myself evicting tenants who couldn't pay rent because of what is to come, then there would be no point in purchasing the insurance. It may be some insurers will pay out whilst then tenant is still living there (if you know of any insurers who fall into this category, please advise) but I am not sure I would be comfortable with kicking out someone who is potentially ill and lost their job due to this virus.

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The Landlord 18th March, 2020 @ 10:54

@Gareth
In regards to your second point, that's pretty standard.

2 Months in arrears in reality is usually 1 month and 1 day. When they say "legal proceedings", they're most likely referring to a S21/S8 notice being served.

I have served S21 notices to tenants that have fallen into arrears as a safety precaution, and not because of ill-will or because I actually wanted to repossess my property. But I do need to protect myself at the same time. I make that clear to the tenant before serving notice, and most have understood the process. The notice itself can't force tenants to vacate, only a court judgement can do that.

From my experience, most RGI companies need to ensure that the landlord is making reasonable efforts to remove the "bad tenant" i.e. serve notice.

My concern is, most people that will fall into arrears due to the coronavirus will be the most vulnerable in society. These people have no savings and live paycheque to paycheque. So even if landlords give them credit, they will NEVER be able to recoup that money, even after the tenant is back in employment.

The reality is, tenants could end up falling 6 months into arrears. We really don't know how long this will last for, but we need to prepare.

No matter how compassionate landlords are, and how much we're willing to help, 6 months arrears simply is not sustainable for most of us.

That's why I've got RGI, just to cover myself for the unknown, and that we actually *might* have to serve notice just so we can survive.

More news and speculation is slowly being revealed about "mortgage holidays", and apparently the Gov will make an announcement in the next few days. But apparently BTL mortgages will NOT qualify. That hasn't been confirmed, but if that's the case, I just don't see this being sustainable for many landlords.

We need to protect ourselves the best we can, while trying to help our tenants as much as we can.

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GriffMG 18th March, 2020 @ 11:24

A thought occurs, thank you for the article BTW, if you reduce the rent - are you letting yourself into problems with the RGI now being based on the LOWEST rent charged?

Might it not be a workable alternative to think in terms of paying utilities or council tax - thus maintaining the actual rent at (say) £700 pcm - this keeping the deposit properly protected (at 5 weeks x £700) and the RGI at same?

Might just be symantics, but that's what makes the world go around...

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GriffMG 18th March, 2020 @ 11:25

oops, background showing up there semantics, not symantics… B-)

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The Landlord 18th March, 2020 @ 11:31

Thanks @GriffMG!

That's an interesting thought. But in most cases, the utility bills are paid directly by the tenant, so the logistics might get very messy. The tenant will need to pass on the invoices, and then the landlord will need to reimburse the tenant etc.

I think there will be an abundant of exceptions to every rule while this is all going on, so I'm personally not going to be concerned with all that.

The Government is pushing for landlords to give rent holidays and rent reductions. Rent holidays might even become legislation for those affected by coronavirus, so I just don't see how it would be possible to face legal consequences if the deposit ends up being more than 5 weeks worth of rent.

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Martin 18th March, 2020 @ 12:43

A fun and informative read as always.

Off the back of this I had a chat with my insurance broker to check my LL insurance was up to par.

Turns out my existing policies only cover me for loss of rent due to building problems but not as a result of tenants not paying for any reason.

I asked him to check out RGI cover for me which he did and came back with a quote which came with a whole host of clauses. One of which was they won’t pay out for a pre-existing scenario. In essence, I can have the cover but if a tenant fails to pay rent as a result of Cororavirus they have an easy out to avoid paying. My broker confirmed this and said it’s essentially pointless now.

Check your policy details carefully before you splash out on expensive, possibly useless cover.

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The Landlord 18th March, 2020 @ 12:48

@Martin
Thanks for sharing, interesting to know. And good advice, for everyone to check their policies! At least you know where you stand now so you can make any necessary plans.

As said a few times, I don't really understand how insurers will be able to determine if the claim was due to coronavirus if the information is not disclosed. Moreover, it is possible to make a claim during this time and it not be coronavirus related.

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Jock Munro 18th March, 2020 @ 13:29

Excellent post packed full of thought-provoking material.

Thanks for an excellent round-up.

Interestingly, the Government has announced an hour ago protection https://www.bbc.co.uk/news/uk-51939634 renters are to be given protection from eviction. That's worried me. Is the Government going to help protect me as a small-time landlord from tenant arrears?

Thankfully I have a 50/50 mortgage on each of my three properties and I'm so glad I didn't stretch to 75%/25% mortgage to try and buy a fourth property 6 years ago. It just felt too much of a risk.

I have quite a large contingency built up but I'm worried it'll not survive a sustained long term assault.

Always enjoy your posts.

Cheers

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The Landlord 18th March, 2020 @ 13:38

Thanks @ Jock, appreciate it.

Yup, I think that announcement will worry a lot of landlords.

On the flipside, there's now news circulating that lenders WILL allow sole-trader landlords to defer payments on their BTL mortgages, which will definitely help. Yesterday, that was believed NOT to be the case. Unfortunately, it doesn't look like landlords that operate through a limited company will be eligible. I will confirm once I know more.

Details are moving and changing very quickly at the moment! Only time will tell how this all pans out.

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Robert 18th March, 2020 @ 20:53

Good article and one of these products where " I wished I'd bought that " one question and I ask it as you may know it of the top of your head

can this be applied to existing tenancies or would you have to go back and ensure they comply with the four conditions listed ? I ask as all my tenancies pre date the letting fees bans etc so all the checks including tenant referencing,passport checks etc were carried out by the agent and I don't have copies of them just confirmation they checked out OK and of course the tenancy agreement.

can anyone advise ?? cheers and stay safe

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The Landlord 18th March, 2020 @ 21:02

Thanks @Robert,

To be honest, I've received a lot of mixed signals. Some landlords have said they've had no problems getting RGI, and others have said it's been a struggle. Circumstances have varied as well.

To be honest, I think a lot of providers are changing their polices by the hour, and reacting to the market.

I think the best thing to do is just contact one if them and find out what their requirements are. They might just insist that you run another credit check on your tenant/guarantor.

Best of luck!

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Carmel 19th March, 2020 @ 13:12

Thank you for the information and ongoing discussions I needed today as My Tenant has already at 10am 18th asked what I could do to help with the rent as Quote "we are bound to get corona virus. God loves a tryer eh. I was empathic. I'm am glued to TV in the hope that Boris may just decide to give us LL a break here..pigs might fly eh. Think your great and always say it like it is. Your blog makes me smile Thank You

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Antonio 19th March, 2020 @ 13:55

Great article, very informative, and the humour helps to counter this total hysteria that the fear, rather than the virus, is spreading.

I just wanted to tell you all that RGI polices seem to have been pulled from the market. I called a couple of companies who pulled them a couple of hours ago.

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GriffMG 19th March, 2020 @ 14:14

I don't see how insurers can continue to offer this product while there is going to be legislation which just about makes it 100% sure that people will want to claim on it - the idea of insurance is a distributed risk, not a certainty

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The Landlord 19th March, 2020 @ 14:31

Thanks @ Antonio, appreciate it.

And thanks for letting me know! Not surprising to be honest. It was expected!

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Antonio 19th March, 2020 @ 15:04

You are welcome. We need to help each other out in these difficult times.....

And yes indeed it was to be expected.

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Lucy Stephanie 20th March, 2020 @ 18:22

Huh… I hadn't thought of that. Here I am thinking I wouldn't be making any sale this month because of the quarantine/lockdown and now I see people with properties to rent out won't be having any income from their renters. Oh this Corona virus is just terrible.

All the fearmongering has become successful. Add to the fact there are stubborn and unsanitary people around the world. Oh boy. I'm thinking there will be a travel boom once this is all over but for the meantime everyone's being forced to work online. Ugh.

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Mr Mark 26th March, 2020 @ 10:21

Hi The landlord

Can I just clarify that we are allowed to ask for proof of a change in financial circumstance of tenants.?

We have a tenant who has tried to claim a reduction previously stating that the bills were ridiculously high. At this stage she hasn't lost her job (in fact prior to her contacting us asking for a 35% reduction in rent), in fact this week she told me she was busy with work and worked in an essential industry (for an electricity company).

Whilst I will extend help to any genuine case I feel that she is taking advantage of the situation, to once more ask for a reduction.

We are lucky that there is no mortgage on the property, and we do have RGI.

In addition her 6 month agreement end at the end of April. Is it Ok to suggest that she just vacate the premises at the end of this. This wouldn't be classed as an eviction would it.

Thanks

Mark

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