My business tenant has failed to pay the rent – What can I do?

18/02/2022

You may consider forfeiting the lease. You might be able to do this if the lease contains a term allowing you to re-enter the premises, and whether any associated pre-conditions have been met. You will not be able to forfeit the lease if you have inadvertently waived your right to do so. You must tread carefully here as it is possible to waive your right to forfeit the lease simply by demanding outstanding rent, or accepting rent, among other actions. Therefore, it is always best to seek legal advice before taking any action.

Forfeiture may be the best option for you if you want to redevelop the premises, or you are confident that you can re-let the premises quickly, and at an equivalent rent.

You should only proceed with forfeiture using a reputable certificated bailiff and after receiving legal advice. The reason for this is that you will become the bailee of all goods found on the premises, and you have legal duties to account for those goods.

An alternative may be to levy “distress”. This is where a certificated bailiff is instructed to enter the premises and seize a tenant’s goods. The goods are held until the tenant pays the arrears, and if the tenant fails to discharge the debt, the goods may be sold and the proceeds of sale applied towards the arrears. Levying distress can be particularly effective as it puts a great deal of pressure on certain tenants to pay, and is usually a quick process. However, it is not always appropriate – legal advice relating to this should always be sought.

If your tenant has sub-let, it is sometimes possible to step into your tenant’s shoes and collect rent directly from the sub-tenant. This can be done by serving notice under Section 6 of the Law of Distress Amendment Act 1908.

If the lease was granted before 1996, there is also the possibility of pursuing the original tenant for the outstanding rent, even though they may have moved away from the premises long ago. With newer tenancies, it may be possible to pursue a former tenant, but only if they have signed an authorised guarantee agreement (“AGA”). If you wish to pursue any of these options you will need to serve the correct notice, and there are strict time limits to be observed.

In addition to the above, there are also the traditional debt recovery routes to be considered, including the commencement of a debt claim in the County Court or insolvency proceedings. These have advantages because they allow the lease to continue, and so liability for the rent to continue to accrue. Where there is an AGA in place signed personally, this can be the best route to maximize your recovery from the premises.

Finally, it is important to be aware that, just because there may be a rent deposit, this does not automatically mean that you can use it. It is always recommended that the Rent Deposit Deed is checked thoroughly before any action is taken to ensure that the proposed action is legal, and all necessary notices have been issued.

18/02/2022
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