There is growing concern amongst private landlords regarding rent arrears with one Scottish letting agency taking controversial action. The agency has contacted tenants asking them to sign a “moral contract” which commits them to settling their rental arrears. While this may be seen by some as a “good PR stunt” what does it really mean and does the contract have any power?
Coronavirus rental arrears
As we covered in one of our recent articles, many private landlords are readying themselves for a significant hit to their finances. The UK economy is expected to fall in the aftermath of the coronavirus pandemic and many tenants will be unable to pay their rent going forward let alone rental arrears. The authorities have already given tenants a minimum three month protection from eviction so this obviously places private landlords in a very difficult situation. This protection could well be extended with both political and electorate appetite for further assistance going forward.
Letter to tenants
The controversial letter to tenants confirms that their landlord (client of the letting agency) has received and accepted their request for a rental holiday. This is one of the formalities introduced in light of the government’s assistance for both tenants and landlords. The letter goes on to ask tenants to sign and return a tearaway piece of paper to commit unconditionally to repaying their rental arrears as soon as possible. This is a moral obligation not a legal obligation and as a consequence would have no weight in a court of law.
The letter also goes on to suggest that landlords may themselves have been furloughed or even lost their job. In a blast of reality, the letter also highlights the fact that many landlords will be living under reduced income as a consequence of the coronavirus. One sentence even suggests that landlords “are no different to you and I, and they too have been affected by Covid-19”.
Opening the door for negotiations?
In reality this moral contract is worthless and in some cases might alert tenants to the fact that their landlords are struggling. Could this prompt a number of tenants to step forward and offer a reduced payment in full settlement of rental arrears? Might it also prompt some tenants to ask their landlord to renegotiate their rental rates?
The fact is that even in the aftermath of the coronavirus both landlords and tenants will be struggling. The idea that all landlords are “rich” is well wide of the mark with many struggling with short-term cash flow while looking to the longer term for hope. It is extremely unfair to expect landlords to cover their own mortgage holiday payments while tenants attempt to renegotiate their arrears – and potential rental rates going forward.
Conclusion
It is starting to look as though landlords should be readying themselves for a significant hit when attempting to collect rental arrears. Yet again, they could be left to pay the price for an issue which is totally out of their control. The courts have been and continue to be sympathetic towards tenants and their rights have increased dramatically of late. Can you imagine a judge evicting a tenant because they were unable to pay rental arrears as a consequence of the coronavirus?