Unfortunately, a landlord’s festive cheer can often be dampened when a tenant fails to pay the quarter’s rent that falls due on Christmas Day. Although the market seems to be picking up, tenants can often find other things to spend their money on, seeing their landlord as a soft option.
However, there are various remedies open to commercial landlords who want to take action in the New Year. Indeed, landlords who act promptly in the New Year will still be able to take advantage of the age-old remedy of distress. It is thought that the Tribunals Courts and Enforcement Act 2007, which will remove all the teeth from the remedy of distress, will not come into force before April 2014.
The first decision for the landlord to make is whether he wants the tenant to remain in the property. Finding a good, or indeed any, tenant can be difficult at the moment and, therefore, unless the landlord has really reached the end of his tether, forfeiture which will bring the lease to an end will probably not be the best option.
Landlords should first consider the most straightforward and cost effective options; is there a rent deposit, a guarantor or a sub-tenant? Using the rent deposit is a very short-term solution, but can bring some relief to landlords. Often there will be a requirement for the tenant to top the deposit up, but if they cannot pay the rent, the chances of them topping up the deposit will be remote. Depending on how connected the guarantor is to the tenant, then they may well be worth pursuing for the arrears. A guarantor could be pursued through court proceedings or bankruptcy, more of which below. If there is a sub-tenant at the property who is paying, an easy way to recover arrears would be to serve a diversion notice on the sub-tenant requiring them to pay rent to the head landlord until the arrears are paid off.
As above, until the 2007 Act comes into force, distress will be a good option where you have a tenant with valuable goods at the property which they own. If the tenant is in arrears of rent (and this may include arrears of service charge or insurance if they are described as rent in the lease) then the landlord can instruct a bailiff to seize goods belonging to the tenant. If the tenant does not pay the rent owed, the goods can be sold and the proceeds retained by the landlord. This is a quick, cheap option, but it will only assist where the goods belong to the tenant.
If none of these remedies can be used, then the landlord may only be left with court proceedings or bankruptcy. These remedies are only really useful if you have a tenant that won’t pay rather than can’t pay. Unless the tenant has assets against which a judgment can be enforced, court proceedings will be a waste of time and expense. Similarly, if the tenant ignores a bankruptcy notice, there is unlikely to be any real benefit in issuing bankruptcy proceedings. These remedies can be initiated to put pressure on the tenant who has the money to pay up for fear of a County Court Judgment or being made bankrupt.
This is very much a whistle stop tour of options available to commercial landlords who want their tenants to remain, but pay up. If you would like to discuss the options available to you in more detail, please contact Michael Clark, OTB Eveling’s specialist property litigator.