Deposit Diaries: Rent Deferral and Deposit Cap

While lockdown, due to Covid-19 has been eased and steps are slowly being taken to return to a ‘new normal’, for many, worries and concerns will remain.

With countless people facing financial hardships, conversations surrounding the continued affordability of rent payments are more prevalent than ever. It is not surprising therefore, that there may be an increase in requests from tenants seeking reductions in the amount of rent they pay each month.

Whilst a landlord may accept a reduced rent on one occasion or for a period of months to provide reasonable assistance to a tenant, it is crucial for both parties to distinguish and confirm the nature of the agreement made and clearly document that agreement.

There are numerous ways that this can be done, for example, emails and text messages can be used to establish that both parties are in agreement.

It may be the case that a landlord accepts a temporary lower rental payment i.e. for a fixed period, with the expectation that any underpaid rent is to be settled at a later date.

What should then be agreed is the details regarding the lower rental payments; this should include the exact amount of money owed and the date on which the repayments are to be made by.

What should also be disclosed are the consequences that could incur if the repayments are not made by the tenant by the agreed date such as, the outstanding payments being deducted from the tenancy deposit.

It may also be the case that a landlord is prepared to accept a reduced rental amount for a set time period however agrees any underpayment are ‘waived’ by the landlord, never expected to be repaid by the tenant.

Consideration should be given to the Tenant Fees Act 2019 (the ‘Act’) and the deposit cap which states that the deposit must be capped at 5 weeks’ rent for tenancies with an annual rent of under £50,000 or 6 weeks rent if the annual rent is £50,000 or higher.

As this is based on the value of the rent at the time the tenancy agreement is granted any reduction in rent, after the tenancy agreement is signed, will not impact the amount of deposit able to be held. It is only if a new or renewed tenancy agreement is entered into to reflect an agreed reduction in rent, that the deposit cap will come into effect.

If this occurs a landlord must be aware that they ensure any excess deposit, over the deposit cap allowed, is returned to the tenant.

For further information on this topic, take a look at our recent TDS Seminar which explores how to respond to mid-tenancy rental changes and disputes.

 

Sandy Bastin is head of dispute resolution at TDS.

 

 

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