December can be a challenging month for commercial tenants which can often lead to difficulties in paying rent. These rent challenges for landlords of commercial tenants can place strain on landlord/tenant relations. Most commercial leases require tenants to pay rent in advance on the usual quarter days, which includes 25 December. This period, marked by holiday expenses and fluctuating business revenues, can put a strain on tenants’ finances. As a commercial landlord, it is important to understand the potential issues and take proactive steps in order to protect your position.
If the tenant has historically been a good and reliable tenant, then a landlord may decide to try to resolve the issue of rent arrears simply by having a discussion with the tenant and often by agreeing on a payment plan. However, if a landlord has more serious concerns about the tenant’s ability to pay rent in accordance with the terms of the lease, then it would be sensible for a landlord to understand what steps they can take to protect their position and investment.
What the Landlord should consider
Where a tenant is in rent arrears, a landlord should consider the following (non-exhaustive list):
- Review the terms of the lease and understand both parties’ rights and obligations;
- Is the tenant liable to pay interest on late payment;
- Is the tenant liable to indemnify the landlord for any loss suffered as a result of its breach of the terms of the lease;
- Is there a guarantor;
- Constructive discussion with the tenant in order to find solutions;
- The statutory procedure of Commercial Rent Arrears Recovery;
- Letter of claim and potentially followed by a debt claim;
- Forfeiture; and
- Insolvency proceedings.
Each case should be assessed on its own merits in order to ascertain what step(s) the landlord should take.
If a landlord is considering forfeiting the lease, then it must be careful not to waive its right to forfeit.
Act Fast
As soon as a landlord is aware that a tenant has failed to pay rent, the landlord should act quickly, not only to protect its position but also to avoid further breaches of the terms of the lease by the tenant.
How can we help?
If a tenant breaches the terms of the lease, whether it be by failing to pay rent or otherwise, the landlord should promptly seek legal advice.
Chris Chan is a Partner in our expert Dispute Resolution team, specialising in property disputes, rights of way claims, landlord and tenant disputes and commercial disputes.
For more information on the subjects discussed in this article, get in touch with Chris or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
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