Dangerous fog of liability to full rent during Covid-19?

by akhan

15:29 PM, 12th April 2020
About 2 months ago

Dangerous fog of liability to full rent during Covid-19?

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Dangerous fog of liability to full rent during Covid-19?

I believe the guidance is clear regarding rental payments in relation to downturn. The case in Central London Property Trust v High Trees House [1947] KB 130 deals with this in issue which should be of great interest to all.

If the tenant is still in situ then past consideration is not good consideration. In effect that the tenant is already under obligation to make payment under their existing tenancy agreement and full rent is due as the tenant is able to claim relevant benefits and government subsidies.

On the other hand, if the the tenant has vacated then this can amount to new consideration as the property has become vacated and would allow the the landlord to re-let should the situation improve. Promissory estoppel would prevent landlords going back on their promise to accept vacant possession in lie of of the return of keys/money.

If the landlord agreed to allow the tenant to remain and they both agree to accept less rent during this period of COVID, then no doubt that a promise to accept a smaller sum in discharge of a larger sum, if acted upon, is binding notwithstanding the absence of consideration under the concept of Promissory estoppel. The lower rent despite the fact that the promise was unsupported by good consideration, was successfully argued as new consideration in the above case . This would last until the tenants situation improved .

In the High Trees case, this arose during the war and the facts are very similar to COVID.
High Trees leased a block of flats from CLP (landlords) at a ground rent of £2,500 per month. It was a new block of flats at the time the lease was taken out in 1937. The defendant had difficulty in getting tenants for all the flats and the ground rent left High Trees with no profit.
In 1940 many of the flats were still unoccupied and with the conditions of the war prevailing, it did not look as if there was to be any change to this situation in the near future.
CLP (Landlords) agreed to reduce the rent to £1,250 during the down turn years. The agreement was put in writing and High Trees paid the reduced rent from 1941.

Just before the war was over the flats became fully occupied and the claimant/landlords sought to return to the originally agreed rent as tenants circumstances recovered.

The rent would be returned to the originally agreed price for the future only when the occupancy returned to normal.

CLP could not claim back the arrears accrued during the war years when the flats were half vacant but the tenants were held liable when they became fully occupied and the conditions for them had recovered even though they failed to inform the landlord CLP.

Once the fog had lifted (COVID) the full liability was due once the tenants came out of difficulty.

Given most tenants qualify for government support I cannot see how you could argue that there is this difficulty with payments of rent and therefore full liability should be requested, all be it with some lag on payments being made.

Many thanks

A khan

Wikipedia >> Click here

“Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 is a famous English contract law decision in the High Court. It reaffirmed and extended the doctrine of promissory estoppel in contract law in England and Wales. However, the most significant part of the judgment is obiter dicta as it relates to hypothetical facts; that is, the landlord did not seek repayment of the full wartime rent.

Denning J held estoppel to be applicable if

a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made and which was in fact so acted on.”



Comments

Neil Patterson

15:47 PM, 12th April 2020
About 2 months ago

I don't think any landlords are varying the terms of their tenancy by having no option but to allow a tenant to fall into arrears. They would still owe the outstanding rent. How would the situation be any different to a tenant falling into arrears pre-coronavirus?

The new emergency legislation is just extending the terms of notice under section 21 to 3 months and banning possession hearings during the emergency.

Paul Anderton

9:09 AM, 13th April 2020
About 2 months ago

I totally agree with your reply Neil lets not over complicate the issue, nothing has changed with the tenants liability to pay the rent just a short delay in starting proceedings if necessary.

reader

9:26 AM, 13th April 2020
About 2 months ago

Ah yes, a pleasant reminder of my undergraduate days.

In 2020 the principles remain unchanged but the circumstances of many tenants in the private rented market can be very different to 1947. Such rents can be supported by LHA/UC and a 80% wage guarantee.
So any promises should be not to reduce rents but allow slight arrears to build up and be discharged later, but there again those tenants who pay rent way above the LHA etc level might welcome a reduction in these difficult times.

Kevin Thomson

12:55 PM, 13th April 2020
About 2 months ago

I wonder if readers have a view on my situation?

I have flats where students have given their one month's notice (Scotland) to leave.

However, the 'lockdown' situation means one or two individuals remain in large flats. They will probably still be there after the end of their notice period due to the lockdown.

Would you dear readers be charging them rent, and if so, for the entire flat (in line with the joint and several lease) or just for their own room?

There's also the case of students who have left a flat but all their stuff is there. They say they can't get to the flat to empty it due to the lockdown. If they'd been organised they could have taken all their stuff with them when they left in the first place.

Would you follow the letter of the lease and charge these tenants in full? Also worth bearing in mind that I am likely facing many empty properties over the next few months. 'Underwater' in paying monthly overheads and that's before paying my own personal mortgage, bills, food for family. The letting income is our sole source of income.

Grateful for your views.


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