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TODAY'S OTHER NEWS

Special Coronavirus 'moral contracts' with tenants may not work - warning

Agents and landlords who use unorthodox methods of securing obligations from tenants to pay their rent during the Coronavirus crisis may not find them particularly effective.

That’s the warning from property litigation firm Hagen Wolf, which makes specific reference to a Scottish lettings agency which has asked its tenants to sign a ‘moral contract’ to pay any rent arrears in full and as quickly as possible.

At the bottom of the letter from the agent to the tenant is a tear-off slip which says: “I …[name]… agree to pay my part and be #part of the team. I am committed to paying all rental arrears and honour my moral obligation to play my part.” 

Matt Pugh, managing partner at Hägen Wolf, says: “Firstly, there is a question of whether such a moral contract is an enforceable legally binding contract. For a contract to be enforceable, five requirements must be met: there must be an offer, acceptance, consideration, intention to create legal relation and certainty of terms.

“In terms of acceptance, you have to ask how many tenants will return the tear-off slip reaffirming their commitment to pay all rental arrears and their moral obligations towards their landlord. 

“Following recent changes to the law which have, in effect, suspended evictions, communication between landlords and tenants has often been drastically reduced, with the latter often failing to return their landlord’s calls or to update them on their current situation. It might be argued that, if the slip is returned, then a legally enforceable contract between the tenants and the landlords was created.”

The firm argues that the moral contract does nothing more than reiterate the tenant’s obligations already detailed in the tenancy agreement. 

The current suspension on evictions does not alter the terms that both parties agreed to when entering into the original tenancy agreement and it does not, therefore, exonerate tenants from their obligation to pay rent. 

 

 

If tenants fail to make payments or clear rent arrears, they will still be in breach of their contractual obligations and would still be at risk of possession proceedings being issued at a future date, after the current eviction suspension ends. 

“While the use of a moral contract does not effectively change the position for landlord or tenant it might mitigate against the fear many landlords have that the current suspension on evictions has sent the wrong message to tenants who might believe that they have been completely relieved of their contractual obligations during this period” Pugh adds.

  • Suzy OShea

    Telephoning tenants is waste of time. e-mail or registered letter are the best means of communication.

    Of course many tenants are taking these three months as a rent holiday. However, many have also been laid off, or at the very best had their salary reduced whilst working from home. They should be given time to make up the arrears when things return to normal. Many teants will just leave rather than come up with the rent arrears! but Landlords can still blot their credit reputation if they go through the small claims court. this can be more useful than anything.

    PossessionFriendUK PossessionFriend

    I think its BOTH, if you can get to speak with them, - if you'can't, because they won't engage - well that tells you something else. I believe its always better to try to maintain verbal channels of communication [ but don't rely solely on that ]
    I would always follow up the gist of a conversation in an email or letter or even Text / WhatsApp, - ( They can all be printed out and produced as evidence )
    The critical point being is to ' have a record of what was said - done.

     
    Matthew Payne

    I agree. Relationship and evidence. You can only have a good relationship face to face or on the phone, and good relationships will prevent many not all issues spiralling out of control or resolve any issues to start with. Evidence however of everything should always be kept for compliance and litigation. Have a call, summarise in an email. If they disagree with the summary they will query it, if they dont, the summary is deemed accurate.

    I also believe a prompt call adds some weight that someone is prepared to get stuck in and deal with something personally and head on. Letters and emails get ignored, and can suggest the sender is seeking to avoid any personal contact, which can be counter productive. I used to have a credit controller in my last business who managed all my rent arrears and debtors. Collected it all by phone (with follow up in writing). People paid just to make sure they didnt get another call. Not a nice feeling when your phone rings thinking it might be that person chasing you for money you owe.

     
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