Commercial Tenant Not Paying Rent?

commercial tenant not paying rent

Ian McEwan, Property Disputes Solicitor

If you are a landlord and your commercial tenant isn’t paying the rent, you need to take action to protect your interests.

There are a several options available to you.

Some are more drastic than others, and the one that’s best for you will depend upon what you want to achieve.

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

 

***PLEASE NOTE***  Temporary legislation is in place during the COVID-19 pandemic which may affect the ability to use one or more of the options below.

By all means read on, but it probably makes sense to just give me a quick call on 020 7842 1452 , email me at: ian@propertydisputes.co.uk , or send me a message via my Free Online Enquiry Form.

Option 1 – Insolvency Proceedings – The Shock Tactic

A very effective option is to serve a “Statutory Demand” on the tenant giving it 21 days to pay the 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 scare tenants into paying.  It works very well!

 

Option 2 – Letter Before Action – The Other Shock Tactic

Alternatively, you could send a “Letter Before Action” to the tenant to make it clear that if the rent arrears are not paid within a short period of time there is a real risk that you will take them to court to sue them for the outstanding sums, together with your legal costs.

The threat is often very effective (nobody wants a CCJ against them), and if you do plan to take them to court you have to send this letter first anyway.

 

Option 3 – Take The Tenant To Court

If the tenant doesn’t pay up after being issued with a Letter Before Action 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 and you might be able to do the whole thing on paper without a hearing.

If the tenant has assets to enforce against this can be a quick way to get the outstanding sums back.

 

Option 4 – Forfeit The Lease And Take The Premises Back

If you’ve had enough of your tenant not paying and simply want to get rid of them (or if you can re-let the premises to a better tenant) you might want to exercise the right of re-entry to “forfeit” the lease.

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.

 

Option 5 – Levy Distress (NO LONGER AVAILABLE)

Unfortunately, the right to distrain – to send the bailiffs in 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 – CRAR: Commercial Rent Arrears Recovery

This regime is not very popular as you first serve have to serve advance warning on the tenant of your intention to take possession of their goods, losing the element of surprise that was so effective with distress.  It’s rarely used.

 

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

There might be an existing guarantor who can be pursued.  If so a simple letter should do the trick.

If a former tenant provided a guarantee 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 to you instead.

 

Option 8 – Draw Down On A Rent Deposit

Often landlords will require their tenants to provide a deposit, which can be drawn upon if the tenant doesn’t pay its rent.

They’re usually drafted to require the tenant to top up the balance once the funds have been drawn upon.

You’ll probably have to serve notice of the draw down, which should put them on alert that they 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: a temporary rent reduction; monthly rather than quarterly payments; a rent holiday; and/or a future repayment plan.

 

Commercial Tenant Not Paying The Rent?

Hopefully that’s been helpful.

If you want a hand with a tenant of commercial property who isn’t paying the rent then 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

Or complete a Free Online Enquiry

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

There’s no cost or obligation.

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