This week the experts consider the question of the calculation of pro rata rental.
A reader writes that his tenant vacated his leased premises during February, which is the shortest month of the year, and did not stay for the full month.
The reader correctly pointed out that, if one takes the monthly average over an annual period and calculates the pro rata rental for a shorter month, a disparity will arise.
See the reader’s question here.
Although he does not give the reasons for the early departure, it would seem that it was by agreement.
Or it may be the case that the agreed notice period was shorter than the typical one-month period.
If the lease or notice period was to expire at the end of a month and the tenant chose to vacate the premises earlier, he would usually remain liable for the balance of the period and no pro rata rental calculation would be required.
A simple and common-sense approach to the current position, which the reader also suggested, would be to calculate the daily rather than the monthly rental.
The daily amount could then be utilised to calculate the pro rata amount due by the tenant.
The total rental payable by the tenant throughout a single year would be divided by the number of days in that year to work out the daily rental paid.
This would then be multiplied by the number of days the premises were actually occupied by the tenant to calculate the pro rata rental payable for February.
A lease agreement is usually set out in writing and, if not, the key terms should be reduced to writing as required by the Rental Housing Act.
Such an agreement will also usually set out that the terms are not capable of amendment without the revised terms being reduced to writing and signed by the parties.
This amendment is normally contained in an addendum to the main lease agreement.
The parties involved should probably examine the terms of the lease agreement as the document could well contain some direction as to the method of calculation to be applied in this particular instance.
Where the terms direct that the calculation should be determined in a certain manner, the parties should – in the absence of further agreement – use the prescribed method.
In the current instance, it would appear that the parties have agreed to pro rata the rental but perhaps not the method of determining the value of the pro rata rental.
Calculation by using the daily rate should not be objectionable, as it would appear to be the fairest method of calculation in the current circumstances.
If the landlord is releasing the tenant prior to the expiry of the tenant’s contractual obligations, there should be even less possibility for objection.
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