Table of Contents
As a commercial landlord, leasing your property to a tenant is a significant commitment. While you detail both parties’ rights and obligations in your lease agreement, unfortunately, issues can still arise. This article will explain three potential problems a landlord may face in a commercial lease.
1. Tenant Falling into Rent Arrears
One of the most feared potential problems a landlord may encounter is when a tenant fails to pay their rent. As a property owner, you rely on the income from the rent and likely use it to pay your outgoings on the property.
Your tenant’s failure to meet their rental obligations may occur for a number of reasons, including:
- a misunderstanding over which account to pay;
- a one-off missed payment from forgetting to pay;
- circumstances where your tenant’s business is performing poorly, making them unable to pay rent; or
- where your tenant repeatedly fails to prioritise paying rent.
Whatever the reason is, it is essential that you first communicate with your tenant. Through open communication, you can negotiate a solution that benefits both parties. If this is not possible, several options are open to you, including:
- forfeiture of your commercial lease;
- refusing to renew a protected lease;
- initiating the commercial rent arrears recovery (CRAR) process;
- drawing upon the rent deposit; or
- taking court action.
2. Managing Difficult Tenants
Another potential problem a landlord faces is difficult tenants, such as those who continuously break their lease obligations. This may not be the obligation to pay rent but could, for example, include tenants who fail to carry their repair obligations. If your tenant does not keep your commercial property in good repair as the lease requires, you can present them with a dilapidation claim when their lease term ends.
If you have a protected commercial lease, it will have a security of tenure. This means your tenants will typically enjoy the right of legal automatic lease renewal when the lease ends. However, if you are dealing with a difficult tenant, you may be able to refuse renewal. As a commercial landlord, you have seven legal grounds to refuse their legal automatic right for renewal. Two of these seven are for:
- a tenant’s failure to repair the premises to the extent that you believe they do not deserve lease renewal; and
- breaches of other lease obligations, which you believe means you can refuse lease renewal.
Call 0808 196 8584 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.
3. A Lease Dispute Arising
A commercial lease dispute can arise when you and your tenant disagree over a matter in the lease. Lease disputes can be timely, and costly, and damage the relationship between you and your tenant.
Lease disputes can arise for various reasons, such as:
- a tenant’s failure to pay rent;
- disagreement over repair obligations;
- disagreement after a rent review;
- a noisy or disruptive tenant; or
- issues when subletting the property.
If you do face issues with your tenant, try to resolve this informally. It is wise to keep records of the issue at dispute and evidence meetings in writing for your reference. You might refer the matter to alternative dispute resolution where the two of you cannot resolve the lease dispute. How you resolve a lease dispute will depend on the issue and whether your lease agreement details any dispute resolution methods.
This cheat sheet outlines what you should be aware of in your lease agreement.
Key Takeaways
As a landlord with a commercial lease, you can encounter problems during the lease term. It is helpful to be aware of these and understand how to best avoid or resolve them.
If you need help understanding your rights under a commercial lease agreement, 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 allows a business owner to occupy their property as their commercial premise in return for rent.
A potential problem a landlord may face with their tenant includes disputes over rent, repair obligations, renewal, or anything else under the lease agreement.
We appreciate your feedback – your submission has been successfully received.
