It can be a worrying situation when a commercial tenant stops paying their rent.
Beyond the uncertainty it represents, a tenant not paying their rent can leave you with a pressing issue that you might not know how to resolve without legal assistance.
In this guide, we’ll cover what to do if a commercial tenant doesn’t pay rent so you’re better prepared when faced with this situation.
When it comes to dealing with a commercial tenant who isn’t paying their rent, you have several options.
However, before deciding on one method, it’s best to speak to a commercial solicitor who will be able to talk you through those options and advise you on the best course of action for your circumstances, as this can be a complicated area of the law.
Some steps to think about when your commercial tenant fails to pay rent include:
- Find out why your tenant isn’t paying rent
- Seek legal advice
- Consider forfeiture
- Consider debt recovery proceedings
- Consider insolvency
- Consider commercial rent arrears recovery
1. Find Out Why Your Tenant Isn’t Paying Rent
Before you move forward, it’s worth finding out why your commercial tenant has stopped paying their rent.
While it might be because they’re facing financial difficulties you’re not aware of, it might be that you’re not fulfilling your legal obligations as a commercial landlord.
Can A Commercial Tenant Withhold Rent?
In most cases, whether a tenant can withhold rent will depend on the lease. Generally speaking, commercial leases prevent a tenant from withholding rent.
This emphasises the importance of drafting a clear and detailed commercial lease with the help of a solicitor to ensure both parties are protected.
It’s important to open a dialogue with your commercial tenant to discover the reason behind them not paying rent.
If you can resolve the problem with a conversation, this will be much faster and less expensive in the long run, as taking legal action should be considered as a last resort.
2. Seek Legal Advice
It’s crucial that you seek legal advice from a commercial litigation solicitor so that you know exactly where you stand and what your options are.
Emotions can run high when a tenant is failing to pay their rent, and you don’t want the situation to escalate before you’ve sought advice from a legal professional who is well versed in this area.
A commercial litigation solicitor will be able to advise you on your circumstances, determine the best course of action, and guide you through the next steps.
At Harding Evans, our solicitors are experienced in handling all aspects of commercial and residential property litigation.
Get in touch with our team today to find out how we can help.
3. Consider Forfeiture
An option to consider when your commercial tenant isn’t paying rent is forfeiture.
In short, forfeiture is the legal process by which a landlord terminates a lease and reclaims the property due to the tenant breaching the lease terms.
The majority of commercial leases contain a forfeiture clause.
Landlords can either:
That said, it’s important to consider whether a forfeiture will result in a void period before a new tenant is found to take their place, as this can have further financial consequences.
If you are considering forfeiture, it is important to seek legal advice to ensure that you have a written right to be able to carry this out.
4. Consider Debt Recovery Proceedings
You can also issue court proceedings to obtain a County Court Judgment (CCJ) against the tenant for rent arrears accrued.
That said, commercial landlords will need to follow the pre-action protocol for civil claims, which includes sending a letter before action.
This should detail the amount of the outstanding debt and provide the tenant with the opportunity to pay the rent that is owed, amongst other details.
It’s important to note that debt recovery proceedings can be complex, so it’s best to seek legal advice on what the best course of action is for your case.
5. Consider Insolvency
Another option to consider is insolvency.
Although this is considered a drastic measure in many cases, this is possible when tenants are not able to meet their debt obligations.
When you’re owed money, you can make a statutory demand, and the debtor has 21 days to pay the debt or reach an agreement to pay.
If they do not pay during this time, you may be able to present a bankruptcy or winding up petition.
Oftentimes, the threat of insolvency is enough to reach a settlement regarding any overdue payments.
6. Consider Commercial Rent Arrears Recovery
Lastly, an alternative option is commercial rent arrears recovery.
Commercial rent arrears recovery enables the landlord to instruct a certified enforcement agent, also known as a bailiff, to take control of the tenant’s goods and sell them in order to recover any unpaid rent.
This only applies to the recovery of arrears for the rent and cannot be used to recover arrears from service charges or other charges due under the lease.
That said, an enforcement notice must be served to the tenant 7 days prior to action being taken.
How We Can Help
If your commercial tenant isn’t paying their rent, Harding Evans Solicitors is on hand to help.
Our commercial litigation solicitors are well-versed in navigating this complex situation and will be able to help you weigh up your options and guide you through every stage.
Contact a member of our team today to learn how we can offer our support.
