Tenant signed tenancy agreement but wants to cancel?

Question

Answer

In some areas of law, there is a ‘cooling off period’ – typically seven days - in which the consumer can choose to change their mind on whatever they have signed up to. This may be a credit agreement, or something that falls under the distance selling regulations, the rules that cover consumers if they are purchasing goods without first seeing the items first hand.

Credit agreement obviously does not apply to a tenancy, and the rules surrounding distance selling regulations were amended in 2014, and tenancy agreements were excluded from the regulations. This means that when your tenant signs on the dotted line, they are legally bound to the terms of the tenancy agreement.

Your options

If your tenant changes their mind on the tenancy, especially if they haven’t yet moved in to the property, you have a couple of options:

Legally, you could insist that the tenant complies with the tenancy agreement that they have signed, and they would have no legal option but to do so. If they breached any aspect of the agreement, by failing to pay rent when due, or subletting the property if there is clause forbidding them to do so, you are perfectly within your rights to issue a Section 8 notice for them to leave the property, or you could wait until four months into the tenancy and issue a section 21 notice, with a view to them leaving at six months.

However, it is worth considering how well the arrangement will proceed if you know that they are not happy with it continuing and ‘want out’ from the start, and the potential troubles it could cause for all involved. It is worth having a frank and honest discussion with the tenant at the start, and ascertain the reason behind their abrupt change of heart. It may be that they have had a sudden change in their financial situation, or their job has moved. Issues like these are problems that are not going to change immediately, and are almost certain to have an impact on their ability to live happily in the property, and possibly maintain their rental payments.

With this in mind, you could offer your tenant the option to sign a Deed of Surrender. This document, signed by both the tenant and the landlord, allows the tenant to relinquish their legal responsibilities over the property, but agrees that they also waive any legal rights that they have to the property. It essentially ‘wipes the slate clean’.

If you choose to insist that the tenant presses on with the tenancy (and you are legally within your rights to do so), consider how you may deal with any potential arrears or hiccups that may arise along the way.

Recouping costs

The main frustration here (other than of course losing a potentially good tenant), is the time you have lost. It certainly doesn’t sound like your tenant meant to mess you about, but frustratingly you now have to start the process of looking for a tenant again whilst your property stands empty, potentially leading to a costly void period.

Many landlords take holding deposits whilst they prepare tenancy documents, and in a situation like this, this could prove invaluable.

Currently, there is no limit on the amount you can request as a holding deposit, however you should be realistic – one weeks’ worth of rent is a good ballpark figure. When the Tenant Fee Ban is introduced the figure will be capped at this level, so it is a good idea to get used to it now. You can keep up to date with the Bill here: https://www.gov.uk/government/news/government-acti...

In the event of a tenancy falling through in this way, you would be entitled to keep your tenants holding deposit, and it may go some way to covering costs incurred and help you pay to get the property back on the market.

Making sure that you are legally covered is vital, you can find more information on tenancy agreements here.