When a business is going through a tough period financially, and creditors are all competing for limited amounts of cash, one of the first things to fall behind can be the rent account. Landlords can often come to an agreement with their tenant to help them through a tricky period, for example by changing payment to monthly rather than quarterly, or by agreeing to delay taking action on arrears for a time.
However, if arrears continue to accrue, even the most sympathetic landlords eventually find themselves having to initiate action against their tenant.
We can advise on the landlord’s options for dealing with rent arrears. This could be a formal pre-action letter demanding payment, followed by either an agreed repayment arrangement or by court proceedings to recover the arrears. We can advise on the merits of this, and whether it is worthwhile to pursue in view of the tenant’s financial circumstances. We can check whether the lease contains any personal guarantees by directors of the company which could be enforced. We can explore the other alternatives, such as forfeiture of the lease.
Forfeiture is a more drastic option, which if successful will end the tenancy. We can advise on whether there is a right to forfeit the lease, whether that right has arisen, and what the landlord should do to avoid waiving that right. We can advise on whether forfeiture is the most suitable option; it may not be if the landlord does not want to be left with an empty property that might be difficult to re-let, or if there is any doubt about whether the right to forfeit has arisen.
Landlords might have reasons other than rent arrears for forfeiting the lease, such as other breaches of the lease including the condition of the property or what the tenant is using the property for. If the landlord decides to go ahead with forfeiture we can deal with the preparation of any relevant Section 146 notice, advise whether the forfeiture should be effected by re-entry or court proceedings, and we can instruct professionals to carry out re-entry if appropriate.