Unpaid Rent – Dispute Resolution

Landlords be Careful Before You Act…

Landlords of commercial premises want to ensure that a tenant is paying rent and all other sums due under the lease. When this does not happen there are various options open to landlords.

To start with, what do you want to achieve? Do you want the property back? Alternatively, are you content to keep the tenant in occupation?

If you would sooner keep the tenant, can you negotiate a payment plan? Is there a rent deposit which can be used to pay any arrears? Are there any guarantors and/or any former guarantors or former tenants that you could pursue? Are there any subtenants? If you consider the tenant has the money and would not want to be made bankrupt or placed into liquidation one option is to serve a statutory demand. Depending on whether there are any goods on the premises it may be possible to take control and sell them using a procedure known as ‘Commercial Rent Arrears Recovery’ or ‘CRAR’. Is there any merit in issuing formal court proceedings?

If you want the property back consider if that is in your best interests. Will you be able to find a new tenant quickly? If yes, it may be beneficial to let to a new tenant and, if possible at a higher rent. If not you could be liable to pay rates, insurance and any other outgoings in respect of an empty property.

If you still want the property back you may be able to forfeit/terminate the lease early. However, you must take care not to ‘waive’ and lose any right to take this step. Once a landlord is aware of any unpaid rent or, of any other breach of the lease it needs to make an election. It can either waive the breach and treat the lease as continuing or, it can decide to forfeit/terminate the lease early instead. A landlord cannot, on the one hand, say the lease has come to an end and then do something which treats the lease as continuing. Demanding and/or accepting rent could waive any right to forfeit. Many of the options mentioned above could also result in you losing any right to forfeit.

If the tenant is in financial difficulty and an insolvency arrangement is in place, this could also affect the options open to you. As soon as you are aware of any unpaid rent or, of any other breach, before taking any action get advice on the best way forward, especially if you are minded to forfeit, otherwise you risk shooting yourself in the foot.

For advice please contact Ruth Ellway, Senior Associate, Dispute Resolution on 0121 796 4023 or email rellway@thursfields.co.uk