Landlords may want to help struggling tenants and give them a rent holiday, but past experience shows putting it all down in writing correctly is the key to future problems.
Landlords need to be clear about the timeframe of any rent holiday given during the crisis to avoid confusion and future disagreements with tenants, leading experts have warned.
Giving a rent concession for a specified period of months, rather than trying to limit it to the duration of the emergency is a safer bet, according to David Smith, policy director at the National Residential Landlords Association.
He advises landlords to get something clear in writing, decide whether it’s a temporary reduction or a waiver – if the money is going to be paid back later, and if so on what basis – and if interest needs to be paid.
Says Smith: “There’s no point in saying ‘until the current situation ends’ as that’s too uncertain. Better to say three months and then extend it later on.”
Tim Frome Legal Director at Landlord Action says: “There is legal precedent which states that a landlord should agree the specifics of any changes to the rent with their tenant.
“A written and signed agreement stating the amount of any reduction and the period of time would be best.
“Remember if the situation changes in the future you can always revisit the agreement, but I would urge landlords to discuss any issues directly with their tenant, then formalise any changes to accepted rent in this way.”
Confused landlords have been directed to an old but relevant legal case of Central London Property Trust v High Trees House, where the owner of a block of flats agreed that a tenant could halve their rent in 1940 due to the “prevailing conditions” at the time.
The agreement simply stated, “We confirm the arrangement made between us by which the ground rent should be reduced…to £1,250.” However, it didn’t mention the length of time this should be, and the tenant argued the arrangement was permanent.
The court decided that the rent should revert to the full amount in early 1945, when the prevailing conditions at the start of the war had disappeared.
Smith tells LandlordZONE that the High Trees case is used a lot, although not in this way.
He explains: “The High Court actually declined to find any agreement existed at all but held that it would be unconscionable for the landlord not to keep the promise of the reduction. Which is why it’s an estoppel.”