Impact of COVID-19 on Real Estate Market

The COVID-19 outbreak had terrific repercussion on the real estate market in the UK. This deadly virus is spreading and at a fast rate across the globe and thus, effecting global economy including the real estate sector. The UK real estate market has observed a massive dip in the business. It is tough time for everyone – Tenants, Landlords, Real estate agents, Brokers, Negotiators; all are facing challenges regarding rental properties and its maintenance.

Read all latest information and updates about Corona virus (COVID-19) on this link: https://www.gov.uk/coronavirus  and stay safe.

During such uncertain times, everyone needs to take some steps in order to retain clients and to contact potential buyers and sellers, who may transact as soon as the market becomes normal. Check out these guidelines or checklist for operating business-

Guidance for Tenants –

It is not compulsory to buy an existing lease to end due to the impact of COVID-19. Entering into a new lease or ending a lease solely depends on the circumstances and the terms of their lease or agreement. Tenants need to follow all practical steps while entering into new agreements or contracts. They need to check their real estate contracts carefully in order to understand the requirements of the business when they cannot operate from the property. Tenants need to include a clause related to unforeseen epidemic outbreak, for future. They need to make sure that they have taken insurance of their property to cover the loss of income. Apart from insurance, they need to keep a check on safety and security of the property too.

This is the best time for tenants to review all requirements and obligations mentioned in the lease, which are operating on similar lines for long years. They can also include conditions for provisional adjustments in the rent. Most of the leases contain a clause related to withholding or suspending the rent. Many leases contain the clause which entitles the tenant to stop making rent payment in certain circumstances. This happens rarely and that too strictly depends on the restrictive situation such as destruction of the property. In such a case, parties must communicate with each other, wherein the lessee gets permission for such suspension of rent from the lessor. Further, it is on the discretion of the landlord can either waive off the rent or can allow partial rent to be paid in such outbreak situation.

Tenants can opt for some adjustments or amendments to be made in the rent payable under the lease. These adjustments can be from switching to monthly payments to quarterly payments of rent. They can go for rent free period as well for next three months or so.

Guidance for Landlords –

Landlords also need to understand their lease obligations and requirements. Mostly, many leases contain force majeure clause, wherein the parties to the lease are provided with some relief when they are unable to perform their duties due to certain events such as acts of God, strikes, Government directions or pandemic outbreaks. They need to review the force majeure clause to check whether it includes COVID-19 prospects or not. Whether it provides for any rent leverage or other sums due under the lease.  As every lease is different, therefore, it is important to confirm the provisions of the lease.

Landlords need to consider all practical issues related to COVID-19 before evicting any tenant or forfeiting leases. If a tenant is not in a position to pay the rent at the moment, landlords should work together with the tenants to find out the solution through negotiations. They need to cooperate and make a plan regarding repayment plan to make up any arrears, payment of utilities, taxes and insurance.

They are required to make any repairs on the rental property subject to the extent of damage made to the property. Sometimes, the landlord or the tenant may have right to terminate the lease as well when the damage is extensive or when the situation demands so. However, there is always an option to negotiate the rent during the pandemic period.