When a commercial landlord has a tenant who is not paying their rent it can be a stressful time, especially if it’s an ongoing problem.
There are a couple of ways that landlords can resolve the situation. This could include Commercial Rent Arrears Recovery (CRAR) or forfeiture of lease. Here we examine the options available to you when your commercial tenant isn’t paying rent.
Why is my commercial tenant not paying rent?
One of the first questions to ask when you’re in this situation is why your commercial tenant might be behind with their rent. For instance, do you believe this to be a short-term problem or something that is going to get worse?
It would be useful to have an idea of their trading history, current situation and what the market conditions are like. For example, are they still operating from the premises or is the market pretty sluggish at the moment?
You also need to consider whether or not you want to keep the existing tenant in the property. Have they breached any other clauses in their lease or is this just an isolated episode?
Can I evict a commercial tenant?
If you have a commercial tenant not paying rent, then carrying out a forfeiture of lease could be a good option. This is beneficial if you want to evict the tenant and bring the lease to an end.
As long as your commercial lease has a forfeiture clause within it, you can conduct a forfeiture of commercial lease. The lease will indicate how late the rent needs to be before you can start the process – this is typically 7 or 14 days.
There is no requirement to provide notice before forfeiting a commercial lease for rent arrears. However, if the tenant has breached a different part of the lease you will need to provide them with notice and time to rectify the issue.
A forfeiture of lease for non-payment of rent can usually be undertaken within a couple of days. Through the use of a certificated enforcement agent (bailiff) you will ensure that the process is carried out correctly and the appropriate notices are displayed.
The agent will utilise the services of a locksmith to make peaceable entry to the property and change the locks. This is typically conducted out of hours and prevents the tenant from gaining entry to the property.
Recovery of commercial rent arrears
If you want the tenant to stay in the property, but collect the rent arrears, then using the CRAR procedure is useful. This is provided free of charge to landlords and quickly collects your commercial rent arrears.
The certificated enforcement agent will send a compliance notice to your tenant. If they don’t settle the arrears within the compliance period, the agent will attend at the premises to collect the rent. Where they are still not willing, or able, to settle the debt the bailiff will take control of goods at the premises.
Commercial rent arrears recovery can be used for commercial rent that is overdue by seven days, but not for any other element, such as service charges or insurance. The property has to be purely for commercial use, with no residential element to the lease. The tenant also needs to still be operating from the premises.
Help if your commercial tenant is not paying rent
At CEA Limited, we support commercial landlords throughout England and Wales when they have problems with their tenants. Whether you’re looking to evict a commercial tenant or collect commercial rent arrears, our team will help you through the process from start to finish.
To find out more contact our commercial property team on 0113 532 8350 or email office@cealimited.co.uk.
More information
How to use the Commercial Rent Arrears Recovery (CRAR) Process