To terminate, or not to terminate: that is the question

“My tenant has not paid his rent again this quarter!”

A landlord of business premises should take immediate action, otherwise rent arrears (or arrears of service charges and insurance premiums payable as rent) may quickly escalate.

Once it has become clear that the tenant is unable to pay, the landlord must decide whether or not he wishes the tenant to remain in the property and consider the most appropriate method of rent recovery.

Should he stay…

If there is a good prospect of recovery and of future payment, the landlord may be prepared to allow the tenant to remain in the property and to instruct bailiffs to seize goods, in order to secure payment of the arrears.

He may, alternatively, seek the assistance of the Court in recovering the rent from the tenant and/or from a guarantor in the lease

…or should he go?

The landlord may be so disillusioned that he does not wish the tenant to remain in the property and looks to bring the lease to an end.

• An option, granted to the landlord in the lease, to determine the same early may be usefully invoked, especially if a break date is imminent. This will be beneficial to the landlord only if the tenant’s statutory right to renew was excluded when the lease was granted.
• A surrender of the lease to the landlord may be negotiated if he has a replacement tenant in the wings or a transfer by assignment of the lease may be agreed in favour of a tenant more able to pay
• Such arrangements do not usually involve court proceedings and may, therefore, prove cost-effective to the landlord. Recovery of the premises will, however, usually involve the landlord in short-term servicing of overheads and in re-letting costs
• Forfeiture of the lease may, as a last resort, be the most effective solution for a landlord and is certainly the most potent - the lease is terminated, the landlord obtains immediate possession of the property and judgement is given to him in respect of rent arrears.
• The right to forfeit must be reserved to the landlord in the lease, as there is no statutory or common law right of forfeiture
• The tenant usually has a right to apply for relief from forfeiture on discharging rent arrears, remedying any other breaches and paying the landlord’s costs.
• A landlord may be deemed to have waived his right to forfeit if he does not act decisively or appears willing to allow the tenant to remain in occupation

And finally…

A tenant with his back against the wall can be a wily and difficult opponent. Effective and timely legal advice is, therefore, essential for all but the most battle-scarred of landlords.