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Payment and non-payment of rent for commercial premises

Landlord’s Remedies for Non-Payment of Rent

Ensuring prompt payment of rent

Having rent paid on time is of critical importance to most commercial landlords. Once the rental money is in the landlord’s account it can start earning interest and can be used to cover the landlord’s outgoings. So what can landlords do to encourage tenants to pay on time and what steps should be taken if tenants are late with rent payments or fail to pay at all?

Good administration

Landlords can take steps at the beginning of a tenancy to make the rent payment process run smoothly. The tenant can be given a standing order form to sign. This is sent to the tenant’s bank and payments of rent will be made automatically on the specified dates. Some landlords ask for rent to be paid by direct debit, although many tenants will resist this. Arranging for the landlord to visit the premises on the rent payment date to collect a cheque is another option.

Landlords need to establish good practices at the outset and ensure they are adhered to during the term of the lease.

When does rent fall due?

The lease will set out the date on which rent is to be paid, often the “quarter days” (25 March, 24 June, 29 September and 25 December) or a regular day of the month. Many leases give the tenant a grace period (such as 7 or 14 days) after the payment date. Once the grace period has expired the landlord is entitled to the rent and may be able to charge interest on the unpaid amount.

Warning letters

If the tenant is persistently late in paying its rent, a letter can be sent reminding the tenant of its obligation to pay rent on time. This can be followed up with more strongly worded letters if necessary. The landlord should keep a copy of any such correspondence on the tenant’s file.

Commercial landlords and letting agents need to be aware of The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 . These regulations may affect you if your tenant (an individual) is in problem debt. These regulations prohibit you from chasing your tenant (and anyone who is jointly liable) for rent arrears, charging late interest and fees and taking any enforcement action for rent arrears caught by the moratorium whilst your tenant is in a ‘breathing space’. These regulations mainly affect residential tenancies, but commercial tenancies may be caught where the tenant is an individual, they are not registered for VAT and the debts do not relate solely to the business.

Legal action

If rent remains unpaid despite the landlord’s efforts to resolve the problem informally, the landlord may need to consider taking legal action. Specialist legal advice should be taken. The following options may be available to the landlord:

• Suing the tenant for non-payment of rent;

• Drawing on a rent deposit, if one is held;

• Requiring the tenant’s guarantor to pay the rent;

• Use of the Commercial Rent Arrears Recovery (CRAR) procedure; and

• Forfeiture of the lease.

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