It is important for the Landlord to think through all of the options available and what they want to ultimately achieve.

When considering possible remedies available, the Landlord should also always consider the following points:-

  • Are there any other breaches of the lease that also require remedy?
  • Is this an isolated incident or are there persistent delays in paying rent?
  • Does the Landlord want the property back or does it want to maintain the Landlord and Tenant relationship?
  • How solvent is the Tenant generally and will the remedy pursued push the Tenant into an insolvency situation, which might inhibit the Landlord’s recovery of money?
  • How cost efficient is each remedy balanced against how long it will take to get the payment of the arrears?
  • Is there a third party who could be required to pay the arrears?

Options

Forfeiture

This is the Landlord’s right to determine the Lease where the Tenant is in breach of its obligations under the Lease. If the Landlord believes that a new tenancy could be granted on similar or superior terms, it may want to take the property back. However if the property is likely to be vacant for some time, the Landlord may want to keep the existing tenancy in place and instead pursue alternative remedies.

Legal advice should always be taken on the effects of forfeiture and the procedure that must be followed by a Landlord to avoid a claim and also that the Landlord does not take other steps which may waive his right and ability to forfeit the Lease for non-payment of rent.

Draw down on rent deposit

The Landlord may be able to draw down from a rent deposit to recover rent arrears. If the Tenant’s long term solvency is uncertain, the Landlord might want to utilise other methods and maintain the rent deposit for any future arrears. A draw down on the rent deposit will waive the right to forfeit.

Pursue Guarantor or Former Tenant

The Landlord may be able to recover rent arrears or other sums due under the Lease from any guarantors or former Tenants under the Lease by way of a contractual guarantee.

Court Proceedings to recover the debt

A Landlord can issue Court proceedings against the Tenant to cover rent arrears. If the Landlord wants to give the Tenant time to get its financial affairs in order and pay the arrears whilst preserving the Landlord and Tenant Lease relationship, the Court proceedings may be the appropriate way of taking action.

Commercial Rent Arrears Recovery (CRAR)

CRAR enforcement involves instructing a certified enforcement agent who will give the Tenant notice that unless the rent arrears are paid, they will attend at the premises and remove goods from the Tenant’s premises to be sold at auction to pay the rent arrears. CRAR cannot be used to recover service charges, insurance, rent or other sums under the lease.

Statuary Demand and Insolvency Proceedings

Where there is no dispute as to the amounts of the debt, the Landlord can serve a Statutory Demand on the Tenant. If this remains unpaid after 21 days, this will be deemed evidence of inability to pay a debt laying the grounds for presenting a bankruptcy or winding up petition.

Payment Agreement

If the Tenant needs time to pay the arrears, the Landlord may want to consider entering into a payment agreement with the Tenant requiring the Tenant to pay the arrears in specific installments.

If the Tenant is generally solvent and the arrears were an isolated incident, this may be a sensible way to proceed.

Landlords should seek specialist help and advice in relation to the various options open and available to them so that more considerations can be reviewed and the most appropriate course of action taken.

For further information relating to the points raised in this article, please contact Director Rob Cooke or a member of the Property Litigation Team.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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