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Are You A Commercial Landlord And Owed Rent?

Being a commercial landlord can be a lucrative venture, but it also comes with its share of challenges. One
of the most pressing issues landlords often face in commercial property rental is rent arrears. This is an issue
which has become increasingly prevalent in recent years, posing significant financial and operational challenges
for landlords. When tenants fail to meet their rental obligations, the situation can quickly become complicated,
often causing a cascading effect on a landlord’s income, cash flow, and overall business strategy.

If you are a commercial landlord facing unpaid rent, it is important to understand your rights and options to
protect your investment.
But what causes tenants to stop paying rent?
Understanding the factors that contribute to tenants falling behind on their rent payments can help landlords take preventative
measures and address the problem more effectively. Several factors can contribute to tenants falling behind on their rent payments
these include Economic downturns, poor business management and lease terms.
Understanding Your Rights and Options
If you’re a commercial landlord dealing with unpaid rent, it’s essential to understand your rights and the options available to
you. Here are some key considerations:
Review Your Lease Agreement: Your first course of action should be to thoroughly review the lease agreement Ensure you
understand what your tenant agreed to in terms of rent payments, and check if there are any clauses related to non-payment,
such as a rent acceleration clause (which may allow you to demand the entire rent amount due for the rest of the lease term).
Communicate With Your Tenant: Before taking any legal action, open a line of communication with your tenant. There may be
underlying issues causing the non-payment of rent, such as financial difficulties or misunderstandings. Resolving the situation
amicably can save time and legal costs.
Try to negotiate a payment plan or temporary rent reduction if your tenant is struggling. Any agreement reached should be
documented in writing.
Consider Legal Options: If discussions with your tenant do not result in payment, you may need to consider legal remedies.
There are a several remedies available to a commercial landlord to address rent arrears. Which route the landlord chooses
to take will depend very much on their circumstances and what the landlord’s ultimate intention is, do they want to maintain
a relationship with the tenant, will costs to recover cause further issues and the possibility of having an empty premises with
business rates liability on the landlord.
A well-thought-out strategy can help navigate the complexities of the situation while protecting the landlord’s interests. Some
of the options available include:
Statutory Demand: Issuing a Statutory Demand is a potent tool for recovering arrears swiftly, assuming there is no dispute over
the owed sums. Following service of the demand tenants have 21 days to respond. Failure to settle or communicate may result
in a bankruptcy or winding up petition by the landlord. Despite the effectiveness of insolvency threats, the desired outcome of
recovery may not be achieved if the tenant lacks funds. This method, though impactful, may not always lead to successful debt
recovery if the tenant is financially challenged.
Commercial Rent Arrears Recovery: If persistent delays occur, the landlord may choose to pursue Commercial Rent Arrears
Recovery (CRAR). An enforcement agent will be appointed to seize the tenant’s goods and sell them to recover the overdue rent.
It’s important to note that CRAR can only be used for recovering principal rent and not for service charges or insurance rent.
Debt Recovery via County Court: Although this may not be the most efficient option due to significant delays in court responses.
It is crucial to consider alternative methods or seek legal advice to address the arrears effectively.
Eviction: Depending on the terms of your lease, you may have the right to evict the tenant for non-payment of rent. The
eviction process varies but typically involves serving the tenant with a notice of default and filing a legal complaint if the tenant
does not vacate the premises.
Prevent Future Issues
To avoid rent collection issues in the future, landlords can take proactive steps such as:
Screening Tenants Thoroughly: Conduct credit checks and verify financial stability before entering into a lease agreement.
Security Deposits: Collect a substantial security deposit to cover potential rent arrears.
Personal Guarantees: Require a personal guarantee from the tenant or a third party, ensuring that someone is liable for the
rent even if the business fails.
This content is not intended to be used as a substitute for specific legal advice or opinions. No recipients of content from this
site should act or refrain from acting on the basis of content of the site without seeking appropriate legal advice.

Reena Popat – Carter Bond Solicitors | info@carterbond.co.uk