Formalising a rent variation

We have been asked on the PainSmith helpline about temporary rent variations during the current pandemic. Whilst formalities are not totally necessary for such an agreement they are certainly in the best interest of both landlord and tenant.

Rent Reduction

Some tenants are unable or struggling to pay rent due to the current pandemic. People have lost their jobs or been put on furlough which means that their usual monthly income is lower than when they originally entered into any tenancy agreement. For this reason, landlords are being contacted to discuss rent reductions or suspensions.

Some landlords will for one reason or another refuse a rent reduction or suspension and legally they are entitled to do so. However, landlords that are reluctant to agree to a reduction may need to consider that having a tenant at a lower rent is better than having no tenant with little prospect of finding a new one any time soon. Therefore where landlords are considering a tenant’s request for a reduction or suspension they should first have a clear agreement on the terms and any review or expiration period.

Once a plan of action is clear we recommend that parties put the agreement into writing. It is possible to formalise the agreement by email exchange. However, there is a risk that something important could be missed or overlooked. A formal document will ensure that the parties note all that has been discussed and consider further issues which may arise when considering how the plan will work.

Formal document

The formal agreement should include (not an exhaustive list):

  1. Whether there is to be a rent reduction or a rent suspension;
  2. If a reduction, the exact amount;
  3. Period of time the agreement will last;
  4. Exact date on which the agreement is to end or whether a review should be considered; and
  5. If applicable, an agreement on how and when any rent arrears should be cleared; and
  6. Will interest be charged on any arrears. If so, from what date and at what rate?

The agreement could be evidenced as stated previously by a simple email exchange or letter. Alternatively, a formal document could be signed detailing the agreement. The formal agreement recommended is a Deed of Variation. However, we recognise that at this current time there may be difficulties having any signature on a deed witnessed.

A party signing a deed in person should only be witnessed in person where social distancing measures can be adhered to. The other option is for the witnessing to take place virtually i.e. via skype or a similar platform and the witness then signing a copy of the deed confirming what they have witnessed. This process is a little difficult and we appreciate that parties may elect to take an easier option however, in the event of a dispute a single formal document clearly setting out the parties’ intentions is much easier to present in court than a ream of emails.

Periodic tenancies

The easy paperwork option would be for the parties to agree a new fixed term tenancy with any rent reduction or suspension noted. Where a new tenancy is not desirable a Deed of Variation should again be agreed and formalised.

Where parties agree to a formal agreement on any rent payments including any future rent payments the ‘Section 13’ process will be redundant. It is for this reason that we recommend that any rent variation agreement is evidenced formally.

Tenant Fees Act 2019

Where landlords agree to a rent variation, they are entitled to apply a reasonable charge for the formalities of executing it. However, the charge is limited to £50 or the reasonable costs of doing the work. Evidence of the reasonable cost will need to be retained and a tenant is entitled to dispute the cost if they believe it is excessive. A tenant who believes the costs are excessive may refuse to pay in which case the variation may not take place. However, landlords are advised that it is in their best interest to amicably resolve the matter rather than to apply additional charges leading to disputes which could result in further and higher rent arrears.

Finally, it is important that any rent variation agreement does not permit any charges that breach or appear to breach the Tenant Fees Act. With that in mind we refer to our previous post which lists permitted payments for our readers reference.

 

Disclaimer

The contents of this blog post is not legal advice and is provided for general information purposes only. If legal advice is needed readers should contact a solicitor. No responsibility for any information contained within this post is accepted and PainSmith solicitors accepts no liability in respect of the contents or for action taken based on this post.