Commercial Tenant Not Paying Rent?

Are you a commercial landlord? 

Is your tenant refusing to pay the rent?

Have you lost patience with them?

Do you want to take action to recover what’s due?

Or would you like to get them out?

There are a SEVERAL options available to you.

Some are more aggressive than others.

The one that’s best for you will depend upon the circumstances.

I’ve set out a short summary of each of them for you below.

Option 1 – Letter Before Action – The Shock Tactic

• Unless you want the the property back, the most popular option is to send a “Letter Before Action” to the tenant.
• This is a formal letter that makes it very clear that if the rent arrears are not paid within a short period you may take the tenant to court.
• It also claims your legal costs from the tenant.
• It essentially informs them that you intend to sue them for the outstanding sums, together with your legal costs if they don’t clear the debt.
• The threat is often very effective.
• Nobody wants a CCJ against their name or their business!
• And if you do plan to take them to court you have to send this letter first anyway.

 

Option 2 – Terminate The Lease

• If you’ve had enough of your tenant not paying, and simply want to get rid of them, you could terminate the lease and take the premises back.
• This would allow you to re-let the property to a better tenant who will pay.
• You can do this by exercising the right of “forfeiture”.
• It’s very effective, and you can usually have the tenant out within 24 hours.
• Provided the right hasn’t been “waived” all that’s required is a couple of notices and a locksmith to change the locks.
• You can read more about this process here.

 

Note – options 1 and 2 above are by far the most popular options used by landlords where a commercial tenant hasn’t paid the rent.

They are the most cost effective options and usually the quickest way to resolve matters.

 

Option 3 – Insolvency/Bankruptcy – The Other Shock Tactic

• An alternative option is to serve a “Statutory Demand” on the tenant
• This demand gives the tenant 21 days to pay the rent arrears.
• If it doesn’t you are then entitled to present it with a winding up petition (if it’s a company) or a bankruptcy petition (if it’s an individual).
• It’s a great shock tactic to convince tenants to pay.
• It can work very well.

Option 4 – Take The Tenant To Court

• If the tenant hasn’t paid up after being issued with a Letter Before Action  (see Option 1 above) the next step is to issue proceedings at court to obtain a quick money judgment.
• If there’s no defence it shouldn’t take long at all.
• You might even be able to do the whole thing via a written application without the need to attend a hearing in person.
• If the tenant has assets to enforce against this can be a quick way to get the outstanding sums back.

 

Option 5 – Send In The Bailiffs (NO LONGER AVAILABLE)

• Unfortunately, the right  to send the bailiffs in without warning  (to take possession of the tenant’s goods up to the value of the rent arrears) no longer exists.
• It has been replaced by “CRAR” ….

 

Option 6 – Commercial Rent Arrears Recovery (CRAR)

• The CRAR regime involves instructing specialist enforcement agents to take control of a tenant’s goods.
• The agents can then sell them (if the tenant doesn’t pay up) and use the proceeds of sale to satisfy the rent arrears debt.
• This regime is not that popular as you first serve have to serve advance warning on the tenant of your intention to take possession of their goods.
• The element of surprise that was so effective when sending the bailiffs in unannounced has therefore been lost.
• The advance notice of an intention to exercise CRAR can however prompt payment.
• Some tenants are terrified of having their goods seized, so it can be a good option in the right circumstances.

Option 7 – Pursue A Guarantor, Former Tenant, or Subtenant

• If you have a commercial tenant not paying rent, and with no obvious means to pay up, all may not be lost.
• There might be an existing guarantor who can be pursued.
• If so a simple letter to them claiming the debt should do the trick as they will usually be personably liable.
• They could therefore be taken to court or made bankrupt if they don’t pay.
• Alternatively, a former tenant may have provided a guarantee.
• If that is the case you might be able to claim the arrears from them.
• The same might be true of an original guarantor.
• And, if there is a subtenant in occupation, you could serve a notice on them to divert their sub-rent directly to you instead.

 

Option 8 – Draw Down On A Rent Deposit

• Often landlords will require their tenants to provide a deposit from the outset.
• This can be drawn upon if the tenant doesn’t pay its rent.
• You might have a “rent deposit deed” setting out details of how the deposit can be used.
• A rent deposit deed is usually drafted to require the tenant to top up the balance of the deposit to its original level whenever the funds are drawn upon.
• You’ll probably have to serve notice of the draw down.
• This should make it clear to the tenant that they will need to sort things out going forward.

 

Option 9 – Talk To Your Tenant

• You don’t have to take enforcement action straight away.
• Instead you could talk to your tenant to see what the issue is.
• They might have just forgotten to pay.
• Alternatively, they might be struggling and need some extra time to pay, or a short deferment.
• If you’re inclined to agree a concession to help your tenant trade through a difficult period, you could go with option 10…

 

Option 10 – Agree a Concession

• During tricky times it often makes more sense for a landlord to work with its tenant to help it remain solvent and profitable.
• It can often take a long time to find a new tenant, so some rent can be better than none.
• You can agree any concession you like with a tenant.
• This could include: a temporary rent reduction; monthly rather than quarterly rental payments; a rent holiday; and/or a future repayment plan.

 

Commercial Tenant Not Paying The Rent?

Hopefully that’s been a helpful summary of the options available to you.

If your commercial tenant isn’t paying the rent and you’d like to discuss your options in more detail feel free to get in touch, I’d be happy to help.

 

Get In Touch

You can call me now on 020 7842 1452 

Alternatively, email me at: ian@propertydisputes.co.uk

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I’ll get in touch as soon as I can for a chat about your legal rights and options.

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