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Tenants asked to sign a ‘moral contract’ committing to repay rental arrears

A letting agency is asking tenants to sign a ‘moral contract’ to express their unconditional commitment to repay their rental arrears in full. 

The agreement is designed for tenants whose income may have been affected by Covid-19.

At the bottom of the letter, there is a tear-off slip which says: “I …[name]… agree to pay my part and be #part of the team. I am committed to paying all rental arrears and honour my moral obligation to play my part”, but this could cause a problem moving forward.  

Experts at property litigation firm Hägen Wolf say that it may be a way of maintaining effective communication with the tenants through the Covid 19 crisis, but its effectiveness is questionable. 

Matt Pugh, managing partner at Hägen Wolf, commented: “Firstly, there is a question of whether such a moral contract is an enforceable legally binding contract. For a contract to be enforceable, five requirements must be met: there must be an offer, acceptance, consideration, intention to create legal relation and certainty of terms.

“In terms of acceptance, you have to ask how many tenants will return the tear-off slip reaffirming their commitment to pay all rental arrears and their moral obligations towards their landlord. 

“Following recent changes to the law which have, in effect, suspended evictions, communication between landlords and tenants has often been drastically reduced, with the latter often failing to return their landlord’s calls or to update them on their current situation. It might be argued that, if the slip is returned, then a legally enforceable contract between the tenants and the landlords was created.”

Hägen Wolf argues the moral contract does nothing more than reiterate the tenant’s obligations already detailed in the tenancy agreement. The current suspension on evictions does not alter the terms that both parties agreed to when entering into the original tenancy agreement and it does not, therefore, exonerate tenants from their obligation to pay rent. 

If tenants fail to make payments or accrue rent arrears, they will still be in breach of their contractual obligations and would still be at risk of possession proceedings being issued at a future date, after the current eviction suspension ends. 

Pugh added: “While the use of a moral contract does not effectively change the position for either landlord or tenant it might mitigate against the fear many landlords have that the current suspension on evictions has sent the wrong message to tenants who might believe that they have been completely relieved of their contractual obligations during this period.”

Poll: Do you expect a moral contract to be an enforceable legally binding agreement?

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