Table of Contents
As a commercial landlord, one of the most worrying fears may be that your tenant will pay rent late or enter into rent arrears for non-payment. Therefore, you should know what this means and what you can do if you face this situation. This article provides a landlord’s guide to rent arrears and late payments by tenants in the UK.
The Importance of Rent
Both you, as a landlord, and your tenant have rights and obligations under a commercial lease. These will be in the provisions within your commercial lease agreement. One of the most significant obligations for both you and your tenant is that they pay you an agreed amount of rent on the date specified in your commercial lease agreement.
Remember that a lease agreement is a legally binding contract, so your tenant must adhere to their payments. Where they pay their rent late or do not pay at all, this is a severe breach of the lease and can significantly affect you. Therefore, there are numerous actions you may wish to take to ensure they pay.
Discuss Late Payments
Although it is essential that your tenant pays their rent and that they do so on time, it is also crucial that you maintain an amicable relationship with them. Therefore, it is always a good idea to discuss any issues that may cause your tenant to pay rent late or to get into rent arrears. When you understand the cause of this, you may be able to arrange a plan to resolve the situation.
Continue reading this article below the formCall 0808 196 8584 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.
Charge Interest
When your commercial tenants pay their rent late, you can add interest on their rent to account for this. By law, you can claim interest for rent payments.
Recover Missing Rent
If your commercial tenant is in rent arrears, there are ways you can successfully recover it, including:
- drawing from the rent deposit;
- pursuing the guarantor;
- initiating debt recovery; and
- undertaking the CRAR process.
We explore each option below.
Rent Deposit
You may have the option of using the rent deposit your tenants gave you at the start of the commercial lease for any unpaid rent. However, before you do this, you should consider if:
- the lease agreement or rent deposit deed allows you to deduct the rent from it; and
- whether you prefer to reserve it for other lease issues, such as future damages for dilapidations.
Guarantor
If your tenant provided a guarantor when they entered the commercial lease, you can pursue them for your tenant’s failure to pay rent. You may also be able to follow any sub-tenants for their share of the rent.
Debt Recovery
The law allows you to recover reasonable debt recovery costs through the activities of your business, and this includes late rent or rent arrears.
Commercial Rent Arrears Recovery (CRAR)
CRAR allows you to recover the rent your tenant owes, which does not involve court action. This is where you ask enforcement agents to obtain your tenant’s rent for you or ask them to seize their goods.
You can only use CRAR to recover rent where the rent should have been paid at least seven days ago. You must serve notice on your tenants before the enforcement agents carry out their tasks, and you can also use CRAR for any sub-tenants.
This cheat sheet outlines what you should be aware of in your lease agreement.
Pursue Legal Action
A situation where your commercial tenant is in arrears with their rent may cause you to resort to legal action. There are several routes you may wish to take.
Statutory Demand
If your commercial tenant owes you at least £750 in rent, you can serve a statutory demand on their company. This will place pressure on them to pay their rent debt, as not doing so could mean they face liquidation. This is a reasonably inexpensive method to recover unpaid rent.
Court Action
If you consider court action for the rent debt, you should take legal advice. This action should be a last resort as it can be timely and costly. It will involve serving a letter before action on your tenant and for both parties to comply with time rules when replying to one another.
Terminate the Lease Agreement
When a commercial tenant is in rent arrears or regularly paying their rent late, you may feel that the lease is not worth continuing. You, therefore, may wish to terminate it.
You can terminate the lease through forfeiture. It is the most powerful option open to you when your tenant breaches their obligation to pay your rent. You may do this through peaceable re-entry or serve a section 146 notice on your tenant.
You should note that your tenant has the right to ask the court for relief from forfeiture. If your tenant agrees to pay the rent arrears, the court will often grant this. However, your tenant will typically also have to pay your legal costs.
Key Takeaways
If you are a commercial landlord and have a tenant who pays rent late or fails to pay rent, this is a breach of the lease. In this instance, you can charge your tenant interest for late rent payments. Nevertheless, it is always a good idea to discuss their reasons for late rent payments or rent arrears and see if you can reach an agreement. You may, however, need to resort to one of the rent recovery actions available to you, such as CRAR. Alternatively, you may wish to take legal action, which can be in the form of court proceedings. As a commercial landlord, you can also terminate the lease for rent arrears such as through forfeiture.
If you need help understanding rent arrears and rent payments in the UK, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
What does it mean if my tenant pays rent late or has rent arrears?
If your tenant pays their rent late or is in rent arrears, this breaches the commercial lease.
What can I do if my tenant pays rent late?
If your tenant pays their rent late in their commercial lease, you can, for example, charge them interest. This is your legal right.
We appreciate your feedback – your submission has been successfully received.
