Perplexed by property law? Relax, Solicitor Claire Haynes is here to answer your most pressing questions…
Dear Claire
Q: My tenant hasn’t been paying rent due to Covid-19. I feel that I was very generous on both the March and June quarter days but now my patience is running out. Can I use the rent deposit for June’s rent and demand the full amount again in September?
A: It sounds like you might have entered into a concession agreement with the tenant, either informally or documented in a side letter or other document. The terms of your agreement will affect whether you have permanently waived your right to receive the full rent for the March and June quarters. For example, if you agreed with the tenant that they were only required to pay a proportion of the rent due on the March and June quarter days and the tenant did not need to pay you the rest of the rent, then it is likely you would have waived your right to receive these sums. Usually you would not be able to backtrack on an agreement of this nature. In contrast, if you simply agreed that the rent payments could be deferred until a later date, then the tenant will remain liable for the full sums due.
Before using the rent deposit for the unpaid rent, you will need to check the document which sets out the terms on which you hold the rent deposit. This document is normally called a “rent deposit deed”. A rent deposit deed typically works on the basis that the deposit monies continue to belong to the tenant but they are charged in favour of the landlord. The rent deposit deed will usually set out the circumstances in which you can draw down sums from the deposit. I imagine that your situation is exactly the type of scenario envisaged by the rent deposit deed and so you are likely to be able to use the rent deposit to cover the rent arrears. If you do so, the deposit deed would usually place the tenant under an obligation to replace the rent deposit monies, but this might not be realistic in the current economic climate and circumstances. This further default could give you another potential claim against the tenant for the missing rent deposit monies.
As long as you haven’t agreed that the tenant can pay a reduced rent on a permanent basis, which could take effect as a variation of the terms of their underlying lease, you should be able to demand the full rent on the September quarter day.
In terms of recovery of the arrears of rent, I would advise taking legal advice as there are currently restrictions on evicting tenants and the methods which can be used to recover arrears from them.