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Responding to breaches of tenant’s covenants

Non-Payment of Rent and Other Breaches of Lease Covenants

Non-payment of rent

Non-payment of rent is a huge cause of concern for commercial landlords. The approach taken by the landlord will depend on the circumstances, the level of arrears and the tenant’s payment history. Options include informal discussions with the tenant, the sending of one or more reminder letters, calling on a guarantor, use of a rent deposit or legal action via the courts.

Breaches of repairing covenants

If a tenant allows the premises to fall into disrepair the landlord will need to take action to protect the value of his investment and to ensure that the premises remain attractive to future tenants. If informal resolution does not work, the landlord can serve a schedule of dilapidations requiring the tenant to carry out repairs or pay the landlord appropriate compensation. The landlord may be able to enter the premises and carry out the work itself, at the tenant’s cost. As with all breaches, forfeiture of the lease is available as a last resort.

Unauthorised use or nuisance

Most leases restrict the use to which the tenant may put the premises and require the tenant not to use the premises in a way that is unlawful or that causes a nuisance. If a tenant breaches these covenants this can causes significant problems for the landlord. It may face complaints or legal action from disgruntled neighbours or the local planning authority. The landlord needs to take action straight away.

Unauthorised assignment or underletting

Leases tend to restrict the tenant’s ability to assign (i.e. sell) the lease or to grant an underlease. Usually the landlord has to give approval to an assignment or underletting and can only withhold approval if it is reasonable to do so. It may be reasonable to withhold approval if, for example, the proposed assignee’s financial position suggests that it will be unable to afford the rent. If a landlord becomes aware that an unauthorised transaction has taken place, it needs to decide whether to permit the transaction retrospectively or whether to take legal action.

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