As many tenants still continue to be bound by rents agreed during the recent boom years, landlords will have experienced delays in payment. When times were good, forfeiture and chasing the tenant for the debt through the courts were viable options, but few landlords want to lose a tenant in a falling market for rents or pay the cost of legal proceedings. If there is a rent deposit deed, this may help to reduce the debt but is not usually enough to cover the ever increasing rent arrears.
Tenants of small shops and other units often set up a company to enter into the lease whilst they act as a personal guarantor, as the company usually has few assets other than the lease. If they default and have a property of their own which is not in negative equity, the threat of being sued for non-payment of rent can be calamitous as the family home may have to be sold. Whether or not the landlord has recourse to such an outcome, it may be advisable to consider ways of keeping the tenant’s business afloat. After all, a mutually acceptable arrangement in respect of rental payments is surely preferable to an empty unit.
If rent is currently payable quarterly it can be accepted on a monthly basis, a reduced rent for one year could be offered, a re-scheduling of payments or not seeking to enforce payment of full rents payable under the lease are all options, any of which could be the difference between success and failure for the tenant’s business. The landlord can meanwhile take comfort from the fact that if the lease is by deed, he has 12 years to claim any accumulated deficit.
The result could be a happy tenant with the means, after a year or two, to pay back the rent arrears and the interest permitted by the lease. Moreover, the landlord will have retrieved much if not all of the income that he would otherwise have lost were the property to have remained empty.
There is Always Tomorrow or Next Year!
