By Simon Preston, Commercial Management Surveyor & Registered Valuer
When a commercial business is not paying their rent it can prove a difficult and stressful time for a busy landlord, and certainly a headache they can do without.
Of course, rights to recover rent and any other sums due have been restricted by Government legislation as part of their response to the Coronavirus pandemic, with protections for businesses from eviction extended this summer to March 2022.
The laws were put in place to ensure businesses such as nightclubs, and those in the hospitality sector which have spent large periods of time closed, have been afforded the time and space they need to recover financially.
Unpaid rents have essentially had to be ring-fenced as a focus has been placed on tenants and landlords working together to come to an agreement on how to handle the money owed.
Businesses having problems paying rents is no new issue to commercial landlords however, and nor should be the aim of working towards an amicable agreement and plan to ensure a landlord doesn’t lose out.
At Garness Jones we have been helping landlords deal with such situations for more than two decades, guiding them through the various steps they can take to recover outstanding payments, whilst also being mindful of the need to support businesses through challenging times.
Perhaps now more than ever, landlords are in need of experienced, independent advice on how best to ensure they are not left out of pocket.
Here, Simon Preston, who heads our Commercial Management team, provides an overview of the process we follow when assisting landlords who find themselves with tenants who have not met their rental requirements.
If you require advice tailored to your circumstances, call 01482 564564 for impartial professional assistance.
The first question to ask - Why is my tenant not paying their rent?
Before rushing into action, it pays to consider carefully why a tenant has not been meeting their rent agreement.
At Garness Jones, our Chartered Surveyors are experienced at dealing with disputes between landlords and tenants and we firstly act as a go-between to help both parties find a common ground.
Should a tenant stop paying rent, we believe it’s wise for landlords to consider several key questions before taking action. These include;
- Would you like to keep the existing tenant?
- Is this an isolated incident?
- Have they breached any other clauses in the lease?
- Do they have a strong history of trading?
- Could your actions lead to insolvency – and make recovery impossible?
- Would you like to recover the property for sale or development?
- Is the cost of pursuing the money more than the amount owed?
- What’s the state of current market conditions?
What options are open to landlords?
In our experience, most commercial landlords want a stress-free life.
Once you’ve taken the time to analyse and assess the situation, it might prove prudent to enlist some professional help. Whether you opt to use an agent to conduct negotiations or not, it’s worth knowing all of the options available. They include;
- Arranging for the payment of arrears in instalments: Handy if you want to maintain a working relationship, but it’s essential to have a formal written agreement in place before doing so. Otherwise, it could lead to you being unable to terminate the lease should instalments not be paid.
- Drawing down on a deposit: A nice tactic to use if a tenant is experiencing short-term cash flow issues. Unfortunately, most deposits don’t provide cover for very long, but it is an option.
- Pursuing a guarantor: Should the lease have a guarantor written into it, they could be liable for any sums owed if the tenant fails to pay.
- Ending the tenancy (forfeiture): If the arrears and future rent are unlikely to ever be paid, forfeiture is the best way for a landlord to enter the property ‘peaceably’ to retake possession. If you want to consider this option, the lease must have a valid forfeiture clause – the terms of which must also be adhered to. As a last resort, you may choose to issue Court proceedings to recover any rent arrears and secure forfeiture of the tenancy.
- Commercial Rent Arrears Recovery (CRAR): CRAR is a complex procedure which requires various notices to be served on the tenant. Basically, you then instruct an enforcement agent to take control of the tenant’s goods so they can be sold to recover any arrears for principal rent. Before pursuing this option, we would advise seeking professional help.
- Statutory demand and insolvency: Serving a statutory demand on a tenant is complicated and should only be used when there’s no dispute about the amount of arrears owed. Get it wrong and you could be liable for significant costs.
Resolving disputes quickly & professionally
At Garness Jones we are known for pairing commercial landlords with respectful tenants who have long-term growth aspirations.
If two parties do get caught up in a dispute, we can provide professional submissions and representation to quickly resolve the issue, but communication is key.
To find out more about how we operate, please don’t hesitate to get in touch – call 01482 564564 for an informal discussion.
