Landlords and tenants: you can't have one without the other. And as Covid-19 is bringing choppy waters for both right now, their fates, as ever, are intertwined. But fairness and transparency as we navigate a pandemic can help both stay afloat.
Many tenants had funds for April’s rent, but with 330,000 people laid off work in March, at least temporarily, and the period of shutdown now likely to continue past Easter, rent for May and beyond is in focus. If you have lost income or expect to, applying for the available subsidies as well as early and open communication with your landlord is the first step.
First off, the virus has brought some new ground rules. The Emergency Measures in the Public Interest (Covid-19) Act means a blanket ban on both tenancy terminations and rent increases during the emergency period. That's the case even if the increase or termination notice was served before the emergency period.
So if you are a tenant, your rent can’t go up and you don’t have to leave until after the emergency period. Full stop. For notices of termination served before the emergency legislation, the clock stops on March 27th. And it will only start again when the emergency is over. Paused rent increases can’t be backdated.
But the old rules still apply too. Just because your landlord must let you stay, doesn’t mean you don’t have to pay. Tenants are expected to pay rent – that’s the law. Any arrears built up are payable.
"Where tenants are still working and earning, our advice is pay your rent where you can afford to pay your rent," says John Mark McCafferty, chief executive of housing charity Threshold.
With the number of those claiming jobless benefits or wage subsidies tripling to more than half a million in March, difficulty in paying rent and drawing on subsidies to do so is a reality for many.
The available supports include the €350-a-week flat rate Covid-19 pandemic unemployment payment available for the duration of the pandemic to those who have lost their job or are on reduced hours and the self-employed who have become unemployed. Rent supplement is available too. The amount you get is determined by your rent and your income.
Those getting rent supplement are expected to contribute towards their rental costs. The minimum contribution for a single person in receipt of a basic supplementary welfare allowance and not subject to an age-related reduction on their social welfare payment is €30 per week. A couple’s expected minimum contribution is €40.
Landlords in a position to offer flexibility must ensure the terms are clear and in writing
The minimum rates that apply to people receiving a jobseeker’s or other payment are €32 per week for single people and €42 per week for a couple.
Depending on your circumstances and where you live, the combined supports may not cover your rent in full. Average monthly rents at the end of 2019 ranged from €1,725 in Dublin to €582 in Leitrim. Where subsidies won’t cover the rent, landlords are being asked to show understanding and reach local arrangements where they can.
With talk of mortgage “holidays” and rent “payment breaks”, there can be confusion about obligations.
"We've had a few tenants who genuinely believed there was a total holiday on rent and a few who may have been chancing their luck," says Gavin Mulcahy, managing director of Get Let. His company manages 600 rental properties in Dublin. "There's been so much information over the past few weeks, you can forgive people for not being up to date."
For tenants experiencing genuine distress, he says he is heartened by what he is seeing on the ground. “A lot of landlords are showing an enormous amount of compassion.”
His agency asks tenants in difficulty for a letter from their employer confirming their reduced job status and asks them for a proposal in writing for what they can pay. “We are really asking them to commit to the first month because God knows what’s going to happen down the line and how long this is going to go on for.”
Arrangements being agreed are varied, he says. “If you have three adults sharing a house who all lose their jobs and their rent is €1,600 between then and you multiply €350 by four weeks by three people, you actually have quite a substantial amount of income,” he says. “We found that a huge percentage of people actually say, ‘Well hold on, we can afford this, or can we just have a 30 per cent or a 20 per cent deferral.’
“If we are deferring rent, we ask when they think they will be able to pay the balance and over what period of time.” He says the vast majority have come up with a workable plan.
When it comes to such plans, language matters. Landlords in a position to offer flexibility must ensure the terms are clear and in writing.
“A distinction should be made between ‘rent deferral’ and ‘rent forgiveness’, says Enda O’Toole, principal solicitor at law firm Mallin O’Toole. A deferral means the rent must be paid back. That the shortfall be made up before the expiration of the lease might be a useful horizon, if it is realistic. “But they are free to agree to whatever period they want.”
Termination of tenancy
Where a tenant refuses to pay anything, landlords can apply some of the usual levers, but they operate to longer timelines during the pandemic. For example, where a tenant has not paid rent, they can be issued with a “warning notice for failure to pay rent”. A sample notice can be found on the Residential Tenancies Board (RTB) website and it is recommended this is sent by express post.
If a tenant vacates without paying, a landlord can pursue a case by submitting a dispute resolution application to the RTB
For tenancies of less than six months, a tenant will now have 28 days, increased from 14 days, from receipt of the rent arrears warning to pay overdue rent. If arrears aren’t paid, the landlord can issue a “notice of termination of tenancy”. However, critically, they can only issue it after the emergency period. For now, that’s three months on from March 27th. The tenant then has a further 28 days to quit.
If a tenant vacates without paying, a landlord can pursue a case by submitting a dispute resolution application to the RTB. And for those who think they might just be able to walk away from old rent commitments, bear in mind that the RTB can use tenants’ PPS numbers to try trace to them to a new address.
For those who are in house or apartment shares, it’s tricky. Some leases may specify that all signatories are jointly liable for the rent, so if one can’t pay their share, the others are on the hook. In the past, if a party wanted to move out, the others may have had the option to advertise the room, backfilling the spot to make up the rent with the lease updated accordingly or a new lease drawn up.
Social distancing measures, however, make property viewings problematic. The measures are keeping those who need accommodation and landlords with vacant properties apart. The department says viewings are “a matter between the landlord or agent and their prospective tenant”.
“Given the physical-distancing Government advice, clearly people need to hold off on physical viewings,” says Threshold’s McCafferty. “We have heard of virtual viewings, but we would advise tenants never to agree to take a place until you have viewed it.
“We are all asked to make sacrifices and be compliant with the rules around tackling the virus,” says McCafferty. “For those landlords that can afford to, we are either asking them to reduce rent payments or give tenants some kind of rent holiday where there is an inability to pay.”
Despite the tenor of some comment, landlords aren’t all gold-plated. There are plenty with mortgages among the newly jobless too. There are older landlords for whom rent is their only retirement income. There are some landlords who never wanted to be landlords – buying their “starter” home at boom-time prices just before the last financial crash, renting was their only route through negative equity.
Missed mortgage payments may shove those who were just coming up for air back under. On the other hand, there are also some individual and institutional landlords minimally impacted by the crisis.
Landlords who agree a deferral with a tenant to take half the rent now and half at some time in the future must still pay tax on the whole amount
For landlords experiencing difficulties, the banks are offering a three-month mortgage payment break. This offers temporary breathing room. But it means more interest in the long term and the repayment will be more when it resumes.
Get your bank to calculate the figures for you. If your cash flow is tight, a three-month break may be the best option. Or you could decide to take a partial break, continuing to pay a portion of the mortgage. If cash flow isn’t a problem and you have savings, you could dip into them. The Money Advice and Budgeting Service can help you make an informed decision based on your circumstances.
For landlords, the tax return to be filed this October will deal with rental income from 2019. As usual, landlords have the option to pay 100 per cent of their liability for 2019, or 90 per cent of what they think their final liability is going to be for 2020. This may leave many in a quandary, says Declan O’Hanlon, tax partner at Grant Thornton.
Landlords who agree a deferral with a tenant to take half the rent now and half at some time in the future must still pay tax on the whole amount.
“Technically, you are obliged to pay tax on the full amount,” says O’Hanlon. “You are obliged to pay tax on what is receivable, not just what is received.” Even if the outstanding rent is not due to be paid back until 2021, the tax must be paid this year. Once you have an entitlement to receive the money, it is treated as income.
A landlord charging €1,500 rent who thinks he may never receive the €300 he agreed to defer can opt to record a bad debt on his tax return. “I show income of €1,500 on my return, but I put in a bad debt provision of €300. You can put it in as a bad debt if you think you are not going to get it.”
October is still some way off and it is impossible to say where we will be with Covid-19 at that point. As with everyone else, Revenue has been making allowances on some deadlines in the current weeks of the crisis. Whether any allowance will be made on deferred rent closer to the filing date is currently in the realm of wait and see but, for landlords looking to keep their affairs in order, it is certainly not something they can bank on.
Landlords can claim tax relief on mortgage interest as usual, including any extra interest paid as a result of taking a mortgage payment break. Where your mortgage break means you are paying interest on interest, this interest is not tax deductible.
Just as some landlords and some tenants will be affected differently, there is no one-size-fits-all solution to renting in a pandemic. Landlords and tenants, like the rest of us, are in this together. The months ahead will require give and take from both sides.