Can a tenant stop paying rent?
What can landlords do if their tenant does not pay?
- Forfeiture. Forfeiture is the landlord's right to determine the lease and regain possession of the premises. However, it may not be in the landlord's commercial interests to take the property back. If the property is likely to be vacant for some time, the landlord may want to keep the existing tenancy in place, pursuing alternative remedies and secure the future performance of the tenant's covenants.
- Rent deposit. Draw down if there is one.
- Pursue a guarantor or former tenant for the rent arrears. In some circumstances, the former tenant or guarantor can require the landlord to grant an overriding lease or require the existing lease to be assigned, thus becoming the landlord’s direct tenant. The landlord should factor this in when deciding who to pursue.
- Court proceedings to recover debt, which can include other sums due on top of the rent. However, this process can be expensive and protracted. A court hearing may not be set for several months and the tenant may not feel any impetus to pay the arrears in this period.
- Statutory demand and insolvency proceedings. A statutory demand can be served when there is no dispute as to the amount of the debt and must be satisfied within 21 days or the tenant can be faced with a bankruptcy or winding-up petition. This is often a preferred alternative to court proceedings.
- Commercial Rent Arrears Recovery (CRAR). CRAR allows a landlord to instruct an enforcement agent to take control of a tenant's goods and sell them in order to recover an equivalent value to the rent arrears. Where a landlord has the right to recover rent from its tenant under CRAR, the landlord also has a right to recover rent from an under tenant. This may be a useful option if the under tenant is better placed to pay than the head tenant.
- Payment agreement. The parties can agree a payment plan to settle rent arrears. This is a separate agreement to the lease and must be carefully drafted, so as not to compromise the Landlord’s legal rights to pursue the tenant for those rent arrears.
Is the Government doing anything to help commercial tenants?
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- Coronavirus: How does it impact commercial leases?
What happens if premises are closed?
Can I end the tenancy?
Can a tenant request a rent suspension?
What recourse does a tenant have if it can't use its property gainfully and can't terminate its lease?
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