COVID-19: Contract questions

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    COVID-19: Contract questions

    Hi all, first time posting here and I would really appreciate some thoughts from landlords and tenants alike. Bit of a long one, I'm sorry!

    I was supposed to be moving into a new property with 3 other sharers (all mid 20s) at the end of last month. We have paid a holding deposit and digitally signed an AST contract but have not paid the security deposit or any rent. We were excited to move into the house but then the pandemic suddenly kicked up a gear and we all lost a very considerable amount of income. We are freelancers working in music and one of us has lost all live show income. It's difficult to predict exactly how much we'll lose in the long term (we have all had most projects on the calendar cancel) but we live month to month at the best of times and have no savings (we barely passed referencing and had to provide a guarantor, who also barely passed).

    Our financial struggles are likely to continue long after the formal lockdown is lifted so, 9 days before the tenancy was due to start, we contacted the landlord and politely requested to exit the agreement as we were deeply worried that we would not be able to pay the rent further down the line. They took several days to respond between emails, saying that they were waiting for more information from the government regarding support for landlords and tenants in these times. We reiterated several times that even after the initial chaos is over, we will likely be making very little money and will struggle to pay rent but weren't given any indication of how the landlord wanted to continue. They also increased the break clause from the standard 4 months to 10 just a couple of days before we signed. We had no idea that the pandemic would cripple us at that time and expected to be at the property for at least a couple of years so did not question their reason for doing so (we still haven't been told why).

    3/4 of us are living with our respective parents right now. We were here anyway because there was a month gap between the end of tenancy on our last house and this one. We are fortunate to have good support systems in place and, although we don't really want to be back living with our parents, we are being charged very low rent to live at home during this pandemic. We initially thought they would want out of the contract too since we would now potentially be very financially unstable tenants but since the lockdown started and nobody is moving house they are holding the agreement over us.

    I am aware that technically, the contract is legally binding but we have not have been physically able to obtain keys and carry out the move even if we wanted to due to the current lockdown laws. We would also struggle to get all of our furniture out of storage and set up essentials like broadband, which several of us need for work. The landlord is not willing to let go of the contract and we have been extremely anxious over the past several days trying to conclude this situation.

    I'm curious as to what people's thoughts are on where we stand here? The house can be snapped up as soon as the lockdown lifts as it is in a popular London location (we were told it was only on rightmove for 1 day the last few times it has been let). We just want out of this situation entirely but are worried we will be legally pursued for the rent (which could technically be for the entire 12 months) despite not getting keys, moving in or paying for anything. At the moment we've only paid the holding deposit but are now technically in breach of contract due to not paying anything else.

    For the record, I have been renting for the past 7 years and have an excellent track record with all previous landlords. Just thought this was worth mentioning as I'm not a jammy tenant and always pay rent on time and look after where I'm living.

    Please help! And sorry for the ramble. All advice appreciated

    #2
    Unfortunately due to the chaotic and rushed nature of the way the government has approached this whole crisis, I would say yes you are on the hook for 12 months, even though you find it difficult to work or even to simply move into the place.

    OK you can refuse to pay, but all that means is you will build up huge arrears, even if the current moratorium on evictions is extended.

    I can see why the landlord, in this environment, would refuse to let you out of the contract as well, frankly.

    Comment


      #3
      Originally posted by penguinsforhands View Post
      I am aware that technically, the contract is legally binding but we have not have been physically able to obtain keys and carry out the move even if we wanted to due to the current lockdown laws.
      Unfortunatley from your point of view, the lockdown doesn't actually disallow moving houses. It is government advice that you should avoid moving, but it is allowed as one of the reason to go outside. So the contract is fulfil-able even if problematic to do so in practice.

      A landlord doesn't have to mitigate losses when it comes to tenancy rent so can leave the property empty for the entire term, but you haven't got a tenancy yet (unless that digitally signed contract is somehow a deed) since you haven't taken possession, so I'm not sure whether the landlord would have to mitigate losses for the breach of contract here. If I were to guess, maybe, but that doesn't really help you since no one is moving due to the lockdown.
      I am not a lawyer, nor am I licensed to provide any regulated advice. None of my posts should be treated as legal or financial advice.

      I do not answer questions through private messages which should be posted publicly on the forum.

      Comment


        #4
        Maybe others have seen but I never seen someone who have signed or was invited to sign the AST before the first rental payment.

        Comment


          #5
          Originally posted by KTC View Post

          Unfortunatley from your point of view, the lockdown doesn't actually disallow moving houses. It is government advice that you should avoid moving, but it is allowed as one of the reason to go outside. So the contract is fulfil-able even if problematic to do so in practice.

          A landlord doesn't have to mitigate losses when it comes to tenancy rent so can leave the property empty for the entire term, but you haven't got a tenancy yet (unless that digitally signed contract is somehow a deed) since you haven't taken possession, so I'm not sure whether the landlord would have to mitigate losses for the breach of contract here. If I were to guess, maybe, but that doesn't really help you since no one is moving due to the lockdown.
          I would say OP needs to be careful here, as nothing in any lockdown law suggests he is prevented from receiving the keys and entering the property. Of importance in deciding whether a contract is frustrated is that the event cannot have been in any way induced by either of the parties. It seems like OP may be attempting to do just that in this case and induce the frustration.

          Comment


            #6
            I wasn't suggesting frustration. My first paragraph was actually saying the opposite, that they could move in. The second paragraph is saying that as they haven't taken possession yet, a tenancy doesn't yet exist (assuming tenancy not by deed). The contract and hence the liability to pay what would had been rent still exist, just that it's not technically rent as no tenancy.

            Landlord are required to mitigate their losses for breach of contract, except where we are talking about tenancy rent where they have no such obligation. If OP had taken possession, then they would undoubtedly be on the hook for the whole 12 months unless the landlord agree otherwise. Without a tenancy, on a simple breach of contract, the landlord may have to mitigate but with the rental market as it is at the moment, doesn't help the OP much.
            I am not a lawyer, nor am I licensed to provide any regulated advice. None of my posts should be treated as legal or financial advice.

            I do not answer questions through private messages which should be posted publicly on the forum.

            Comment


              #7
              Agree with KTC

              As far as I can see, no tenancy currently exists, though the OP mentions 3 of the 4 sharers living with parents but doesn't mention if the 4th is in the rental property or elsewhere.

              In which case, penguinsforhands and his co-tenants do need to reimburse the landlord for any loss that their withdrawal causes. You don't mention whether you have contacted the landlord, but I feel the pragmatic approach would be for him to keep all moneys paid to date, though a contribution of (say) a months rent might encourage him not to pursue you for his full losses.

              I suspect (depending on the wording) your guarantor is off the hook, again as no tenancy exists/existed.

              From your landlords point of view though - what were you thinking? You knew this was risky but still decided to sign.

              Comment


                #8
                If none of the tenants has moved in, there's a contract, but no tenancy.

                If that's the case, the tenants are in breach of contract and the landlord can claim for any loss directly arising from that breach.
                As the loss is contractual, it would require the landlord to mitigate their loss.

                Lost rent is complicated when you look at mitigation.
                You'd expect that a popular property in London wouldn't have much of a void period, so, in normal times, the landlord might be able to claim a month or two as loss, because the gap in rent payments could be assigned to the tenant's breach (as it simply wouldn't have happened otherwise).
                The delay that's likely to arise at this particular time is going to be longer, and I don't know how that works out when it comes to mitigating a loss - the landlord is meant to do what they can to reasonably minimise the loss, and a pandemic with limited movement allowed is a factor in reasonableness.

                The reason for the tenant's beaching the contract shouldn't affect the landlord's claim (unless the tenancy agreement has a force majeure / act of god clause).

                If the tenants can't afford the rent and have no intention of moving in, the best thing to do is to communicate this unambiguously (all four tenants need to do this).
                You need to tell the landlord that you are not moving in, you will not be creating a tenancy and that you wish to end the contract immediately.
                The longer the situation is allowed to continue unresolved, the more the landlord is likely to be able to claim.

                If you can afford it, I would try and pay a solicitor to communicate with the landlord, that can have something of a deterrent effect.
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                Comment

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