Where you have a tenant with unpaid commercial rent there are usually two ways of dealing with the situation. This is through the Commercial Rent Arrears Recovery (CRAR) process or a lease forfeit.
Commercial tenant not paying rent
The first thought when you have a tenant who is not paying their rent is to quickly recover it. There is a free commercial rent arrears process that you can go through.
When the commercial rent is seven days or more late, a Notice of Enforcement can be sent by a bailiff to the tenant. This gives them seven clear days to arrange payment (either in full or instalments) before the bailiff can attend at the property.
If the tenant fails to make contact then further enforcement fees can be added to the debt. The bailiff will visit the premises and attempt to make a payment arrangement. Where the arrears are still not forthcoming, the enforcement agent can take control of goods on the site.
If necessary, the premises can be secured to prevent the tenant from making use of the goods. These can then be sold at auction to cover the rent arrears, with further sale and removal fees added. Alternatively, the landlord can allow the goods to remain at the site under a Controlled Goods Agreement. This enables the tenant to continue trading and pay off the debt. If they fail to keep up repayments the goods can be removed.
Find out more about the best ways to recover outstanding commercial rent here.
Commercial lease forfeit
A forfeiture of lease cannot be carried out in conjunction with a CRAR. It needs to be one or the other.
There are occasions where a landlord instructs a bailiff company to carry out a CRAR, but there are no goods of any value at the site. If the tenant is still unwilling to pay the arrears, the landlord may want to simply evict them.
When you have already been through the CRAR process, you’ll need to wait until the next period of rent is overdue before forfeiting the lease.
Landlords can instruct a bailiff to carry out a commercial lease forfeit when a tenant has breached their lease. This is typically for unpaid commercial rent and allows the landlord to end the lease.
A lease forfeit can only take place if there is a relevant clause in the lease and the landlord has not waived their right to forfeit. This can happen if the landlord, or an agent working on their behalf, says or does something to acknowledge that the lease is ongoing. For example, going through the CRAR process, entering into a payment plan with the tenant or starting court proceedings.
Where a landlord has already tried to recover unpaid commercial rent it can be seen that they’ve waived their right to forfeit. In this instance, a forfeit can’t occur until the next month’s or quarter’s rent is overdue.
Recovering unpaid commercial rent
Once a landlord takes back possession of their property through a forfeiture of lease, they may also want to pursue the tenant for the arrears. Any outstanding rent and other charges, such as service fees and insurance, can be recovered through a County Court Judgement (CCJ). This can then be transferred to a High Court Writ and enforced by a High Court Enforcement Officer (HCEO).
For more information on how we can support commercial landlords contact one of our offices.