Commercial Rent Recovery

Published on 19 December 2010 by admin in blog

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Liverpool Solicitors Armstrongs writes as to Commercial Rent Recovery and  what options are available  to recover rent arrears if a Commercial Tenant has not paid his rent.

If you have a commercial rent recovery enquiry or any property litigation matter then call us on 0151 236 3737 or fill in an on line enquiry form at the bottom of  this page.

Distraint

It is possible to levy distraint against the tenants goods or property by instructing a certified bailiff to attend at the tenants premises to recover goods to the value of the rent. Distress can only be levied at the premises which is subject to the lease and not any other premises owned or occupied by the tenant. You can not proceed in this way if the lease has already been forfeited or surrendered.
The bailiff will attend at the tenants premises and identify any goods which are suitable. He will then return to seize those items if the rent has not been paid in the meantime. It is a good way of focusing the tenants mind on payment.  The right to distrain was  to be replaced by the  Commercial Rent Arrears Recovery scheme. This requires the preliminary service of formal notice thus removing an element of surprise and therefore may not be as effective for Landlords. The scheme has never been implemented and with the new coalition government may not now come into force.

Court Proceedings

If you don’t necessarily want to regain possession but want to put pressure on your tenant another way would be to issue court proceedings for the rent as a debt.
A cheaper  alternative would be to serve on the individual or company a statutory demand which if payment is not made within 21 days of service of the demand or an application to set aside the demand not made within 18 days of service then you could proceed with a bankruptcy petition or winding up petition. It would be hoped that  the service of the demand would have the desired effect on the tenant and lead to payment.

Forfeiture

Providing the commercial Lease has a clause enabling you to do so you can forfeit the lease if again subject to the lease the tenant is in arrears of his rent for 14 or 21 days.
It is important to take advice prior to forfeiture. It is important not to do any thing which is inconsistent with the forfeiture. This is paramount to avoid any argument by the tenant that the landlord has “waived” its right, or is “estopped” from doing so. You need to be to be clear that the act of physical re-entry is by way of forfeiture and not for some other purpose. This could be by way of fixing a notice to the premises, a letter to the tenant, and ultimately changing the locks. Certificated Bailiffs should be used to re-enter.
If the tenant  after forfeiture then pays the rent it is likely that he would be entitled to relief from forfeiture if an application was made to the court.

Recovery from Sub-tenants

Section 6 of the Law of Distress (Amendment) Act 1908, which was due to be repealed but the new provision has never come into force, enables a landlord to recover rent from a sub-tenant of a defaulting tenant. A specific notice is served on the sub-tenant in summary saying that a) the tenant has failed to pay its rent and the amount of the arrears and b) that the subtenant is to pay all its rent to the landlord direct until the arrears have been cleared.

Recovery from the original tenant

Where the Lease has been assigned, the original tenant can still be liable under the original covenants in the lease. This is now of only limited assistance as it only applies to leases granted before  1 January 1996, after that date the original tenant would not be liable upon assignment, unless he entered into an Authorised Guarantee Agreement.
Particular statutory provisions must be observed as to notifying the original tenant of the rent claim  and then proceeding against him. Please note that if the original tenant pays the  rent, he can ask for an overriding lease which would create an interest in the property.
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Disclaimer
This site is provided by Armstrongs Solicitors limited for general information purposes only and should not be relied upon as a source of detailed legal knowledge. Information was correct at time of publication, but be aware that it is possible that legal points may have been superceded since. Users should seek advice from a suitably qualified solicitor before taking any action based on information contained within this site. Armtrongs solicitors Limited disclaims all responsibility for any losses arising from reliance on information contained within this site.

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