It's a difficult time for all of us, and some landlords are also feeling the pinch. But what is the situation if you're a tenant and your landlord becomes insolvent? Can you face eviction?
Tessa Shepperson, a legal expert in residential landlord and tenancy law and who runs the website www.landlordlaw.co.uk, tells you what your legal rights are if your landlord goes bust.
Find out what's going on
If you suspect that your landlord is in financial trouble, you should try (discretely) to find out more. Has your landlord actually been made bankrupt (or if your landlord is a limited company, has it been formally wound up)? Or is your landlord subject to an Individual Voluntary arrangement (IVA)? Both IVAs and bankruptcy/company winding up will be administered by an Insolvency Practitioner (someone who has a special qualification for dealing with insolvency-related work).
It may be difficult to find out what's happening, although sometimes these things are reported in the local paper. If your landlord is local, your local Official Receiver's Office may be able to help. But don't be too intrusive. Your landlord won't welcome you asking about his private financial affairs!
How does your landlord going bust affect you?
If your landlord is made bankrupt (or wound up if it's a limited company), then, on the whole, it shouldn't affect you too much. Generally, your rights and obligations will be the same whether or not your landlord is bankrupt, and you will be able to carry on living in the property as if nothing had happened. But do note the following points:
- Rent. If your landlord has been made formally bankrupt (or if it's a company, has been wound up), then you will probably be paying your rent, in future, to the Official Receiver (the government body which deals initially with all formal insolvencies) or the Insolvency Practitioner in charge. Otherwise, you should continue to pay rent to your landlord. But make sure that you pay your rent either by a traceable method, such as by standing order, or that you obtain a receipt. Generally, you will be contacted by the Official Receiver/ Insolvency Practitioner, if there is to be any change to your arrangements for paying rent.
- Repairs. If your landlord is in financial difficulties, it's unlikely that they will be able to afford to pay for expensive repair work. If they have been made bankrupt (or the company has been wound up), then, again, it's unlikely that there will be funds available for this. The best way to get repairs done, therefore, will be to do it yourself and deduct the (reasonable) cost from your rent. But you do need to be very careful when doing this and take legal advice first - the proper procedure is described on my website service www.landlrodlaw.co.uk and in Lawpack's book 'Renting: The Essential Guide to Tenants' Rights'.
- Eviction. You may not have too much problem here, as landlords cannot be evicting tenants without a court order, and if they're going bankrupt, they may not be able to afford the solicitor's fees! If your landlord is formally bankrupt (or wound up if it's a company), it will be the Official Receiver or Insolvency Practitioner dealing with the bankruptcy/winding up who will bring the eviction proceedings, and not your landlord. But they will not have any extra powers and they will only be able to evict you if your landlord could have legally evicted you had he not become insolvent (as opposed to your landlord's mortgage company, who do have the power to evict you, and where you have no defence). If a claim is made against you, though, take legal advice.
- Tenancy deposit. If this was protected by one of the government-authorised tenancy deposit protection schemes, you shouldn't have a problem. Even if the landlord has spent the money, this will still be repaid to you by the scheme administrators. But if the deposit is unprotected, then you may not get it back. If the landlord goes bankrupt/is would up, then you will be an unsecured creditor for the damage deposit money and are unlikely to get anything back other than a few pence in the pound, if that.
Further information
For information on insolvency matters, generally, the best place to go is the Insolvency Service website at www.insolvency.gov.uk.
More information on protecting yourself from eviction and your rights as a tenant is available in Lawpack's book, 'Renting: The Essential Guide to Tenants' Rights'.
If you're a landlord who is thinking of evicting tenants, or needs guidance on terminating a tenancy, Lawpack's book, 'The Complete Guide to Residential Letting' can help.
Lawpack also produces a 'Residential Lettings Kit', which provides you with all the tenancy agreements you need to create a tenancy, as well as a letting inventory and rent book.
Useful links
Landlords: Download Tenancy Agreements now here
Buy-to-let landlords: how to make a profit from the credit crunch
Why you can still make money from buy-to-let in a recession
Students: Don't get bullied by your landlord