Re: Autumn 2017 | Page 88

My commercial tenant has failed to pay their rent : What can I do ?

One of the most important issues faced as a landlord is ensuring that your commercial tenant pays their rent on time . Where your tenant fails to pay the rent and other sums due under a lease , there are several remedies at your disposal which are designed to rectify the breach and recover payment but it will be for you to decide the best course of action having regard to the individual circumstances , current market conditions and any future plans you may have for the property . Depending on your long term objectives , you will need to consider what appropriate action to take and how to protect your position in the event of a tenant defaulting on the rent payments .
However , it is important that you first consider the following points which may assist in helping you deciding what action is appropriate : -
Has the tenant breached any other provisions in the lease in addition to not paying the rent ?
Has the tenant failed to pay the rent on more than one occasion or is this an isolated incident ?
Does the tenant have a strong trading history and are they solvent ? Would pursuing a particular remedy create a possibility of the tenant becoming insolvent or bankrupt and therefore make recovery of any money due from them more difficult ? Do you want to recover possession of the property ( perhaps for development ) or would you prefer to keep the tenant ? Does the cost of pursuing a particular remedy make it worthwhile when considering the level of rent arrears ? Are there any guarantors or third parties under the lease who would be required to settle any arrears on behalf of the tenant ?
Once you have been able to consider the above you should then decide which course of action you wish to take . Our specialist Commercial Property Legal Advisers would be able to help you reach that decision , but the following gives you an overview of the general remedies which may be available to you : -
Forfeiture Most commercial leases provide a right for the landlord to re-enter the property , change the locks and terminate the lease where a tenant breaches any of the covenants ( including non payment of rent ). This remedy is known as “ forfeiture ”.
Where you have a tenant with a poor record of rent payments , or if the current market conditions are strong , you may wish to proceed straight to forfeiture – particularly if you believe that you can easily re-let the property to another tenant on similar ( or better terms ) or command a higher rent . Similarly , if you would prefer to regain possession of the property because you wish to develop it then forfeiture may be an attractive remedy . However , if market conditions are weaker or the property will likely be sat vacant for some considerable time , you may wish to keep the tenant and pursue an alterative remedy to ensure the tenant performs its covenants in the future , especially if you do not have an appetite to pick up a rates bill for that period when the property is vacant ( assuming any rate reliefs have already been exhausted ).
If you decide to embark on the road of
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