Renege Contract – My agent found us tenants for my property and we (landlord and tenants) signed up a tenancy agreement in May for the tenancy to commence in August. However, the tenants have now come back to us before that tenancy commences saying they no longer want it. How do we stand legally?
In this case no Assured Shorthold Tenancy (AST) exists at this time as the tenants have not yet taken up residence. The AST tenancy, a tenancy controlled by statutory rules, now the default residential tenancy in England and Wales, does not apply when the property is not the tenant’s main residence.
However, under contract law the prospective tenants committed themselves to fulfilling their contractual obligations under the letting agreement, i.e., to enter into a tenancy and pay rent for a fixed term of, for example, 6 months. Furthermore, a contract exists in writing, so the parties cannot now deny its existence, as perhaps would have been the case if this had been merely a verbal agreement. Verbal agreements are, in theory, sufficient, but they are difficult to enforce.
As consenting adults, with this level of commitment, the tenants cannot avoid their responsibility to their prospective landlord by simply wishing they had not signed and effectively reneging on the deal. The same would apply in reverse if the landlord tried to back-out.
Basically, an agreement between landlord and tenant in England and Wales is very similar to that between a vendor and purchaser of a property: either party can back-out of the deal anytime up to the point of exchanging contracts. After that they are committed.
In a case like this, in theory, the landlord could claim rent for the period regardless of whether the tenants take up residence. However, some judges would frown on this course of action as the landlord could probably quite easily minimise his losses by seeking an alternative tenant.
It would be far more sensible in this situation to point out to the tenants their legal obligations and try to arriveat an amicable settlement. Generally, the options would be:
- The landlord and tenants agree an immediate cash settlement, which would be an approximation of the landlord’s losses due to any void period and the cost of re-marketing and letting.
- For the tenants to agree to refund the landlords actual losses once the accommodation has been successfully re-let, including rent payment up to that time.
©LandlordZONE All Rights Reserved – never rely totally on these standard answers which apply primarily to England and Wales. Before taking action or not, always do your own research and/or seek professional advice with the full facts of the case and all documents to hand.