A commercial tenant has failed to pay rent – what action can I take?

If a tenant has failed to pay rent and other sums due under a lease, there are a number of potential options that the landlord can pursue to recover payment.  The most appropriate option will often depend on what the landlord wants to achieve in the long term.  In this blog, we discuss each option and when it may be used.

Re-entry

  • Re-entry (also known as forfeiture) is the landlord’s right to end the lease where the tenant is in breach of any of its obligations such as non-payment of rent.
  • Where the right to re-entry has arisen, a landlord must be careful not to do anything that may waive that right such as accepting and demanding rent.
  • A tenant can apply to Court for relief from forfeiture. This will usually be granted and occupation reinstated where the tenant acts quickly and brings the arrears up to date.

Statutory Demand

  • If there is no dispute over the amount due, the landlord can serve a statutory demand on the tenant. This is the first step to insolvency proceedings.  If that demand remains unpaid for 21 days, this is evidence that the tenant is unable to pay its debts and constitutes grounds for a bankruptcy petition or winding up petition to be presented to Court.

Court Proceedings

  • Court proceedings can be issued against the tenant to recover rent and other sums due under the lease. This is a very formal step and ensures that the tenant realises the seriousness of the situation.  However, a court hearing may not be set for a number of months.  The process can also become expensive and protracted.

Commercial Rent Arrears Recovery (CRAR)

  • CRAR is a method of enforcement for recovering rent arrears relating to commercial property. It allows a landlord to instruct an enforcement agent to take control of a tenant’s goods and sell those goods to pay the arrears due.

Rent Deposit

  • If there is a rent deposit, the landlord may be able to draw down from that deposit to pay the arrears and other sums due under the lease. However, if the tenant’s long term solvency is uncertain and there are other options available, it may be advisable to pursue those options and keep the deposit for any future arrears.

Guarantor

  • The landlord may be able to recover rent arrears and other sums due under the lease from any guarantors that are a party to the lease.

Payment Agreement

  • If the tenant needs time to pay the arrears, a landlord may consider a payment plan from the tenant to allow the arrears to be paid over a period of time. This agreement should be recorded in writing and carefully worded.

Contact Us

If you would like any further information and/or require advice on which option may be the most appropriate for you, please do not hesitate to get in touch with our Dispute Resolution team on 0161 926 1534 or hello@mlplaw.co.uk