Business tenancies: Landlord remedies for non-payment of rent

Reflecting the introduction of various legislation providing temporary relief for tenants during the Covid-19 pandemic.

Landlord’s Remedies - Forfeiture

Summary of remedy - Landlord takes back possession of the premises by court proceedings or by peaceable re-entry i.e., by instructing bailiffs to change the locks.

Is the remedy available now? – No, Suspended until 31/03/21 (nb forfeiture still available for other breaches of lease).

Landlord’s Remedies – CRAR (Commercial Rent Arrears Recovery)

Summary of remedy - Landlord instructs an enforcement agent to serve notice, enter the premises, take control of a tenant's goods and sell them to recover the value of the rent arrears (normally available if 7 days’ rent owing).

Is the remedy available now? – Yes, but only if 276 days’ rent is owing, increasing to 366 days’ rent after 25/12/20.

Landlord’s Remedies – Court Proceedings

Summary of remedy - Proceedings are issued at Court for the debt – but judgment will still need to be enforced once obtained.

Is the remedy available now? - Yes.

Landlord’s Remedies – Statutory Demand

Summary of remedy - A statutory demand is a written demand for payment of a debt and can be served for rent arrears of at least £750 (corporate tenant) or £5,000 (individual tenant) – failure to pay is used to establish insolvency for a winding-up petition to be presented.

Is the remedy available now? - Yes – for a tenant who is not a UK company. For tenants who are UK companies, there is no point as statutory demands issued 1/3/20 to 31/03/21 will be void.

Landlord’s Remedies – Winding-up petition

Summary of remedy - A winding-up petition is a court application for a corporate debtor to be put into compulsory liquidation on the grounds that it is unable to pay its debts.

Is the remedy available now? Yes but:

Not on the basis of a statutory demand; Not unless the landlord believes EITHER that coronavirus has not had a financial effect on the company OR that the company would have been unable to pay its debts irrespective of the financial effect of coronavirus.

Landlord’s Remedies – Rent deposit

Summary of remedy - A rent deposit may be taken when the lease is granted as protection against default – landlord can draw down from this if rent is unpaid.

Is the remedy available now? Yes.

Landlord’s Remedies – Recover from Guarantor

Summary of remedy - Third parties may have indemnified the tenant’s liabilities, either as guarantor under the lease, or by being a former tenant (“old lease” or AGA).

Former tenants must be served with a s.17 notice (under the Landlord and Tenant (Covenants) Act 1995) within 6 months of the debt arising.

Is the remedy available now? Yes.

Landlord’s Remedies – Recover from Subtenant

Summary of remedy - Where there is a subtenant, a landlord can serve notice under s.81 Tribunals Courts and Enforcement Act 2007 to divert the rent owed by the subtenant direct to the landlord (circumventing the tenant which is not paying rent).

Is the remedy available now? Yes, but it is considered that the number of days’ rent required to exercise CRAR (see above) apply to this remedy too.

For more information or advice on the remedies outlined above please contact:Helena DaviesPartner, Property LitigationT: 0161 836 8925M: 07557 238 915E: [email protected]