The last few years or so have seen certainty and stability for UK businesses go straight out the window in a spectacular way. The uncertainty that Brexit created threw a wrench in the wheels of an already fickle market, and when COVID-19 hit, chaos was kicked into overdrive.
As a result of all the turmoil at the start of 2020, many homeowners decided to start selling property out of fear of a potential market crash. Many landlords were also put in a tight spot, with unevictable tenants under lock-down not making their rent payments. A wave of layoffs has also incentivized workers with limited savings to sell their property.
Overall, all the way through Q2, many people seemed to prefer having a bit more cash on hand rather than property whose value could drop or whose tenants could cause unresolvable issues. The market picked up in Q3, with the average price of a home reaching £250,000 for the first time since the troubles began back in 2016.
Now, with the second wave of COVID-19 well underway, the market’s ground to a screeching halt once more. The whopping 7.5% year over year increases of the summer months had been impressive indeed. However, experts warned that this type of growth could not be sustained. They were proven right by the meager 0.3% increase of average property prices between September and October.
Overall – times are tough for tenants, landlords, and investors. So what can property management companies do to remain solvent in such troubled times?
Get in Touch With an Expert
Legislation helping businesses cope with the repercussions of the pandemic is getting passed all the time. The Corporate Insolvency and Governance Act of 2020, a.k.a. CIGA, is an example of such legislation. CIGA has introduced measures and procedures that could help companies in financial distress caused by the economic crisis. It has provided companies with new opportunities for recovery – and it’s not the only piece of legislation that businesses can call upon to avoid insolvency.
Due to the difficult situation property management businesses find themselves in at the moment, you need to be aware of each and every last bit of legislation that can help you. Being informed about what you can do to remain solvent should be your highest priority. The easy way to do so would be to get in touch with experienced insolvency practitioners in London and avail yourself of their counsel.
Don’t Take on More Debt
Insolvency is directly related to debt. If you have a lot of debt already, it’s a good idea to avoid accumulating more. Doing this is especially crucial if your creditor has a history of being inflexible or uncooperative with their debtors. If you do take on more debt, make sure you do so with creditors who are willing to negotiate, compromise, and restructure debt.
If you find yourself strapped for cash, it may be a good idea to try to acquire funding via a bank loan. Ideally, you should only do this if you lack funds for your operations or to satisfy pressing debts in the short term but are reasonably sure that’s only a temporary state of affairs.
Another way to deal with empty coffers is to liquidate some assets. Experts claim that the growth in property prices experienced in Q3 of 2020 is unsustainable – and statistics appear to back that claim as well. Brexit is also looming on the horizon, and the COVID-19 crisis hardly seems to abate, either. These factors do not bode well for the state of the UK housing market in the next couple of months. With this in mind, liquidating some assets may not be such a terrible idea.
Restructure your own debt
In light of the current situation, you should not consider taking steps to restructure debt only when faced with insolvency. In fact, looking for opportunities to do so should constantly be on your “to-do” list. Even if you don’t currently find yourself in dire financial straits, it pays to get in touch with creditors and try to renegotiate your debt.
On the other hand, if you are actually facing insolvency, there are programs in place in the UK that could relieve some of the financial pressure. Find out what they are and how you can avail yourself of them.
Restructure Debtors’ Obligations
Both companies and private citizens enjoy some extraordinary government protections right now. You need to know exactly what those protections cover when dealing with tenants so that they don’t take undue advantage of you.
All businesses amass debt, and property management companies are particularly vulnerable to bad debt at the moment. It may be a good idea to reach out to your debtors, especially those whose payments are past due and try to hammer things out. Restructuring their debt may be the only way to get some of it paid.
Implement Secure Business Practices
If you think you are in danger of insolvency, make it a point to avoid unnecessary financial risks. Be especially diligent when researching and considering investments. Do more due diligence on your clients as well as your creditors to make sure they can be reasoned with if push comes to shove. Finally, don’t let social distancing rules stop you from networking and devising plans for the future.
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