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When you enter a commercial lease with a business owner, your lease agreement will detail each party’s rights and responsibilities. If your tenant repeatedly ignores their lease obligations, you may have no option but to take legal action against them and take them to court. This article will explore key considerations for a commercial landlord before taking their tenant to court.
When to Consider Court Action
Despite the court system’s popularity in movies and television, litigation should not be your first option if a lease dispute arises. In fact, it should be your last resort. That is because litigation is costly, lengthy and emotionally draining. You should always consider other options, like alternative dispute resolution to resolve any issue with your commercial tenant.
There are various reasons your tenant can breach their lease obligations. For instance, their business may be struggling financially, causing them to miss a rental payment. For one-off issues, it is better to have an open discussion with your tenant and come to an agreement. However, other breaches can be severe, especially if a tenant repeatedly ignores their lease obligations. In these scenarios, and after trying alternative options, you may have no choice but to consider court action.
Letter Before Action
When you plan to take your tenant to court, you must first warn them through a formal letter stating the following:
- a date when you require your commercial tenant to pay the rent arrears before you take court action; and
- that they are liable to pay any legal fees arising from taking them to court.
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Court Proceedings
After issuing your commercial tenant a formal letter, you might begin preparing your case. Working with a qualified solicitor can prepare you for debt recovery proceedings to seek damages (money compensation) from your tenant.
You need to obtain a country court judgement (CCJ), which allows you to enforce the rent payment your tenant owes you. This is a possession order. Although you can use an online service to obtain a possession order on your commercial tenant, it is advisable to take legal advice if you decide to take this court action on your commercial tenant.
You might also ask for damages where your tenant has damaged your property. If they refuse to pay for the property’s repairs, you might consider a judge’s assistance to enforce the payment. Again, going to court should be a last resort. It may be more suitable to withdraw funds from the rental bond or security deposit, depending on what the lease agreement says.
How Can a Court Help?
Aside from enforcing an order for damages, a court can assist in the forfeiture process and issuing a statutory demand.
Forfeiture
Forfeiture is when you wish to forfeit the commercial lease, meaning the lease terminates and your tenant no longer occupies your property. There are two ways to do this, and one is by taking your tenant to court.
You would apply to a court for possession of your property. If successful, the court will give you a final order that your tenant must give you back possession of the commercial property. Notably, this can be a lengthy process. However, you must follow the correct legal procedure for forfeiture. Otherwise, you risk committing a criminal offence if you, for instance, try to break into your property while the tenant is on the premises.
Statutory Demand
A statutory demand is a document you provide to your tenant, asking them to pay their rent arrears in 21 days. If they fail to, the document will state that you have the right through the court to pursue them with either a:
- winding up petition, if they are a company; or
- a bankruptcy notice, if they owe you rent as an individual.
A statutory demand is a way to shock your commercial tenant and may cause them to pay the rent arrears where they are in a position to do so. As most tenants want to avoid insolvency, they will take the statutory demand seriously.
This guide outlines how to resolve commercial disputes.
Key Takeaways
As a commercial landlord, you may be in a frustrating situation and consider taking your tenant to court. You are most likely to do this when your tenant is in rent arrears. Before escalating issues to a court, you should always try alternative dispute resolution methods. Often, you can resolve disputes through informal negotiations with your tenant. These alternatives will be less costly than the court process. However, where you find yourself considering litigation, ensure you follow the correct procedures.
If you need help with your commercial leasing dispute, our experienced disputes 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. Call us today on 0808 196 8584 or visit our membership page.
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