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As a commercial landlord, you allow a business owner to have the sole occupation of your commercial property through a lease. Your lease agreement is legally binding, so both parties must honour the lease terms. However, issues can arise between you and your tenant, which can become increasingly problematic. Understanding your lease agreement and your rights as a commercial landlord is essential. This article explains how to deal with a problematic tenant.
Visiting the Tenant
If your tenants are problematic during the commercial lease, you should visit your property regularly and communicate with your tenants. Visiting your property will allow you to inspect the property for damage and check that they are using your property correctly, as per the lease agreement’s usage term.
Importantly, your tenant has the right to peaceful enjoyment of their commercial premises under the lease agreement. You still have a legal right to enter the property, though you must give at least 24 hours’ notice.
Monitoring Rental Payments
If your commercial tenant is failing to meet rental payments or is constantly late, you may want to start monitoring these. Problems could occur in the form of:
- late payments;
- payment from various bank accounts; or
- payments from various sources, such as companies or individuals.
Where you need to take action for rent arrears, you also have the right to serve your tenant with County Court proceedings. You could also serve your tenants with a statutory demand, which, if they continue to fail to pay the rent arrears, they could become insolvent. Alternatively, you may take advantage of your right to go through the Commercial Rent Arrears Recovery (CRAR) process, where you ask an enforcement office to recover the rent arrears on your behalf.
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Withholding the Rent Deposit
Another option where your tenant breaches their lease obligations and owes you money is to draw from their rent deposit. You can do this for unpaid rent and other costs arising from their breach. A rent deposit is usually about three to six months’ worth of rent, so it could provide you with sufficient costs to deal with the problem your tenant causes.
Turning to the Guarantor
Where your commercial tenant has a guarantor, you may turn to them when your tenant becomes problematic. The guarantor assures that your tenant will carry out their lease obligations in the commercial lease, and where they do not, the guarantor promises to do so. As such, you have a right to turn to the guarantor and ask them to make good on payments the tenant owes you. Turning to the guarantor is especially helpful when your tenant has become insolvent.
If the tenant was an assignee to the commercial lease and an Authorised Guarantor Agreement (AGA) was in place, you have a right to turn to the previous tenant, the assignor, for owing funds. You can ask them to honour the lease obligation your tenant fails to uphold.
Terminating the Lease
Where you experience problematic tenants, you may have the right to terminate the commercial lease through forfeiture. Sometimes starting the forfeiture process can cause the tenant to change their problematic behaviour as the reality of losing their commercial premises dawns on them.
Forfeiture is your right to terminate the commercial and take back possession. It is one of the quickest and most cost-effective ways of dealing with a troublesome tenant who breaches lease obligations. Your right to forfeit the lease can be either through:
- peaceable re-entry; or
- possession through the country court.
Peaceable re-entry is where you enter the property and change the locks. However, you only have the right to do this if your tenant is not physically at the premise at the time. Once complete, you must give them notice of your action.
This cheat sheet outlines what you should be aware of in your lease agreement.
Key Takeaways
As a commercial landlord, a problematic tenant can cause significant disruption to your property. Understanding how to legally and pragmatically deal with this situation is crucial. For example, key steps you can take include:
- visiting the tenant;
- monitoring rental payments;
- withholding the rent deposit;
- turning to the guarantor; and
- terminating the lease.
If you need help understanding your rights as a commercial landlord when dealing with a problematic tenant, 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 for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A commercial lease is where a property owner grants a business owner the right to sole occupation of their property as their business premises.
A commercial landlord has various rights when dealing with a problematic tenant. For example, they have the right to forfeiture and to withdraw funds from the tenant’s rent deposit.
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