What happens if the landlord agrees to an early termination of the tenancy?

An increasing number of landlords may be asked to consider an early termination of a tenancy in the current circumstances, with numerous tenants either stranded abroad or taking the tough decision that life after the coronavirus crisis may be different for them.

Is the landlord obligated to agree?

In simple legal terms, no. If a tenant is still in a fixed term, they are contractually obligated to see out the remaining period of the contract unless all parties, to include all tenants and all landlords, agree to early termination.

Why would a landlord agree to an early termination?

In reality, this crisis will prevent many tenants from returning to the rented property, or their financial circumstances may have changed to such an extent that they can no longer afford to pay the rent. Would it be wise for a landlord just to ignore the plight of the tenant? Logic would dictate that would not be to anyone’s benefit, including the landlord. After all, a non-paying tenant, or a tenant forced to pay rent, can be a recipe for disaster.

What factors should be considered?

Firstly, the landlord needs to strike a balance between being fair and ensuring they don’t, scare the tenant off completely. Considering the current crisis, it is unlikely that an empty property will be reoccupied anytime soon, given the difficulty in moving home during the coronavirus crisis, and the fact many people will not be looking to incur the extra cost of moving in the uncertain economic climate.

Therefore a number of variables will enter the equation, including the time left on the contract, the financial status of the tenant, how quickly a tenant can vacate and remove their possessions, and the size of the deposit. Each variable will either subtract from or add to the potential sum the tenant may be required to offer to the landlord for them to consider an early termination.

The landlord may also need to consider if there is a guarantor for the tenancy, as they may be able to rely on that fall-back position. A guarantor is ultimately guaranteeing the tenancy in the event a tenant is unable to fulfil the contractual obligations, so they should be approached first before agreeing any early termination with the tenant. Worst case, the guarantor may consider paying a sum to incentivise a landlord to agree an early termination.

How should any early termination be documented?

It would be very sensible to document any agreed early termination in the form of a ‘deed of surrender’.  Simply put, this would be a sheet of A4 outlining the agreement between the parties to include all of the following:

  1. Name and address of all parties
  2. Tenancy address
  3. Date of early termination
  4. Amount due to be paid on or before the early termination date
  5. Any other obligations, such as returning the property in the same condition as at the start of the tenancy and/or returning all keys
  6. Process for returning any deposit
  7. Signed and dated by all parties and witnessed.

Summary

An early termination of a tenancy can be a solution for many parties in the current crisis but for the landlord, a well-prepared document covering all the bases is vital to ensure any future liability is minimised.

It is also worth noting that if a landlord is belligerent and refuses to consider agreeing to early termination, a tenant is likely to seek legal advice. If this happens, it’s quite likely any legal advisor will take a detailed look at the compliance undertaken at the commencement of the tenancy, whether that be deposit compliance, or if indeed the tenancy is at all enforceable. If the compliance is found to be wrong, then it will make chasing any tenant wishing to terminate early for any meaningful sums of money, significantly harder.


Are you a landlord with questions about how the coronavirus crisis could affect you? The experienced lettings experts at Foxes can help. Contact us on 01202 299600 or email lettings@foxes.co.uk

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