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Paying your Mortgage in a Pandemic

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By Ravi Nanga

IN the past we looked briefly at the law as it applies to tenancies and mortgages.

At the end of the day, tenancies and mortgages are simply contracts that describe the particular relationship between the landlord and the tenant and the mortgagee and the mortgagor. While it is possible to have an oral tenancy, a mortgage must be by deed and in writing. This article will examine the position of these relationships during the time of a pandemic, as we are currently facing and where persons may be experiencing financial difficulties.

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Although a tenancy can be oral, at the heart of the relationship between a landlord and tenant is the fact that rent is payable by the tenant to the landlord as a condition of such a relationship, in order to occupy the landlord’s premises.

In the case of a mortgage, the mortgage deed will contain the terms and conditions of the mortgage and will stipulate the method in which the mortgage sum is to be repaid. We have seen since the beginning of the pandemic the financial hardships that have been faced by some persons.

In order to attempt to alleviate this hardship the government introduced a number of new social measures in an attempt to bring relief to persons who were affected by the pandemic.

 

We have also seen that the lock down measures introduced in an attempt to control the spread of the pandemic had a negative impact on certain businesses, for example, with the borders being closed, the airline and hotel industries were negatively affected and most businesses were closed for an extended period, with the result that earnings were curtailed.

Given the measures that were put in place, in some instances, persons were temporarily laid off while other businesses were forced to cease operations. This is a global problem and we have seen many large corporations ceasing operations or curtailing the size of their business.

Given the financial impact that persons faced with either a reduced or no income coming in, it was a real possibility that such persons would not have been able to continue paying rent or keep up with their mortgage instalments.

Given this possibility, there were calls for landlords and mortgagees to work with their tenants and customers respectively in order to alleviate the hardships that persons may have been facing.

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Unfortunately, from a legal standpoint, there was no obligation on landlords and mortgagees to assist tenants and customers in light of reduced or lost income and the landlords and mortgagees would have been within their rights to demand full payment of rent or mortgage instalments.

One of the new social benefits that was introduced was the rental assistance grant, where a grant was being provided up to a certain maximum in order to assist with the payment of rent.

In the event you qualified for this grant, but the maximum was less than your rent, there was no obligation on the landlord to reduce the rent in order to meet this maximum payment.

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The landlord could insist on being paid his full rent, and unfortunately there was nothing that the tenant could do in order to obtain relief. In the event the tenant was unable to keep up with paying rent, the landlord could then pursue any available remedy in order to recover the outstanding rent, including terminating the tenancy.

In the case of a mortgagee, the same principle applied, except in this case, the obligations would have been stipulated in writing and there would have been specified consequences of failing to pay an instalment.

Although there was a call for mortgagees to work with mortgagors where there was financial hardship being faced, again, there was no legal obligation on the part of the mortgagee to grant any relief.

In the event an instalment was missed, given how mortgages are usually drafted, that would have entitled the mortgagee to enforce the terms of the mortgage.

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A usual term of mortgages is that where the mortgagor misses an instalment, the entire sum then outstanding under the mortgage would become immediately due and in the event the mortgagor was unable to repay that sum, it would entitle the mortgagor to obtain vacant possession and sell the property in order to recover the outstanding sum under the mortgage.

Given the nature of contracts, in the event there is a need to vary the terms, such a variation must be agreed to by both parties.

So that, in the event a tenant required some form of relief by way of a suspension or reduction of rent, the landlord would have needed to agree to same.

Similarly, in the event a mortgagor was unable to keep up with mortgage instalments, it would have been necessary for the mortgagee to agree to a deferral and on what terms such a deferral was to be granted.

It must be remembered that contracts are legally binding arrangements and it is important that all attempts are made in order to comply with the obligations contained in a contract.

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Unfortunately, with the advent of the pandemic, that does not automatically trigger any relief from complying with one’s legal obligations.

In the event a person finds themselves in financial difficulty, it is advisable to speak to your landlord or mortgagee, explain the position and attempt to arrive at an amicable resolution in order to weather the difficulties being faced. It must however be borne in mind that a party is not bound to agree to change the terms of a contract that has been entered into.

[Ravi Nanga is an attorney-at-law]

[Please note that this article is intended only to provide general information on the topic being addressed and should not be taken as providing legal advice. In order to be properly advised it will be necessary for an attorney to examine the relevant documents and obtain the necessary instructions before properly advising as to rights and obligations]                  

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