Protecting your business: Guide for commercial landlords when a tenant is in financial distress

commercial-landlords-tenant-financial-distress.jpg.jpg

The final three months of 2024 saw a significant increase in the number of UK firms in financial distress.

Corporate recovery and financial advisory firm Begbies Traynor’s latest Red Flag Report, released in January this year, highlighted the number of UK firms in ‘critical financial distress’ rose by 50.2 per cent on the previous quarter to 46,853.

This rise in companies at risk of insolvency impacts the UK commercial property sector, with more than half of the UK’s businesses renting their trading premises. WHN director Daniel Long, who heads up the firm’s commercial property dispute resolution team, explains the implications and offers advice for commercial landlords.

When a commercial tenant is in financial distress, there are a wide range of implications for landlords.

  • Rent arrears: Companies with cash flow issues may be unable to meet their rental payments. Landlords should be aware that when a tenant is in arrears, they have various remedies at their disposal but there may be other creditors awaiting payment.
  • Dilapidations: Dilapidations are where premises have fallen into disrepair. Tenants in financial distress may have difficulties paying for the maintenance of their property. This can affect a property’s value and lead to costly repairs when a tenant’s lease ends or is severed, especially if the tenant becomes insolvent.
  • Company Voluntary Agreement (CVA): A CVA allows distressed companies to reduce debts or pay them off over a fixed term. Once a CVA is in place, this restricts a creditor’s ability to recover debts, which can affect a landlord’s rental income. CVA proposals often seek to reduce lease liabilities based on a site’s sustainability.
  • Other insolvency situations: Commercial landlords may find their tenants enter administration or liquidation. Each insolvency situation has different implications on the remedies available to landlords, including the ability to terminate the lease and take back possession of the premises.
  • Difficulties re-letting: During periods of economic downturn, it can be more difficult to re-let commercial properties at the same value once a unit becomes vacant. This can, in turn, affect a landlord’s portfolio value, impacting lending capacity and restricting growth. Forfeiture is not always the best way to go as it means terminating existing lease liabilities, potentially becoming liable for business rates and potentially creating a void.

A landlord’s options

There are a range of options available to landlords when a tenant is in financial distress.

Negotiating flexibility in payment terms and other areas may be the most beneficial option for both parties, as it can help prevent further financial distress and reduce the likelihood of insolvency proceedings, leading to a vacant property. Landlords can consider rent concessions; payment plans and re-gear options.

If a tenant’s lease is coming up for renewal, a landlord may wish to renegotiate the terms or change the payment structure to support a tenant.

However, if a tenant has repeatedly missed payments, failed to maintain their property or breached other terms of their lease, a landlord may wish to terminate the lease.

Forfeiture is a tool available to commercial landlords to protect their interests following a tenant breaching the terms of their lease. Many commercial property leases contain a forfeiture clause which enables the landlord to gain possession of their property, bringing the lease to an end. This can be exercised by peaceable re-entry or issuing court proceedings, depending on the circumstances and the type of breach.

For further information on forfeiture and other landlord options, see our blog posts:

My tenant isn’t paying rent. What can I do?
Forfeiting commercial property leases: The benefits and limitations
A landlord’s guide to forfeiting a commercial lease
A landlord’s guide to terminal dilapidations

Understand your tenant’s financial health

Understanding a tenant’s financial position is key to determining the right course of action to take to protect your business during an economic downturn.

Open communication between a landlord and tenant can often help avoid costly legal proceedings. However, there is also a large amount of information publicly available which will give further understanding of a company’s finances.

This includes:

  • Financial accounts available at Companies House
  • Credit assessments available from agencies and credit platforms
  • News stories about the company in the business media

Once a landlord has the clearest picture possible of a tenant’s financial position, they can make a judgement on the best course of action.

Recovering debts

Recovering debts including rent arrears, dilapidations and other charges is often an important part of dealing with tenants in financial distress and can involve navigating complex legal frameworks.

Gaining professional legal advice can reduce financial loss by helping a landlord:

  • Consider and potentially challenge the terms of a CVA proposal
  • Deal with administrators or liquidators to recover losses
  • Ensure compliance with lease terms and legal obligations
  • Identify the right course of action whether negotiation, enforcement or lease termination.

In challenging economic times, proactive steps can help landlords protect their assets. By instructing a solicitor as early as possible, landlords maximise their chances of recovering debts and avoiding restrictions on debt recovery due to insolvency proceedings.

Daniel Long is a director at WHN Solicitors and heads up the firm’s commercial department and property disputes team.

He specialises in resolving disputes between landlords and tenants of commercial leases on matters including rent and service charge recovery, dilapidations, forfeiture, possession, insolvency-related matters, and lease renewal and termination.

For advice on how to deal with a commercial tenant in financial distress, please contact Daniel on 0161 761 8063 or email him at [email protected]

Enjoyed this? Read more from Woodcocks Haworth & Nuttall Solicitors

Latest news

1

Growth Plan maps out £20bn-plus investment journey Mo Isap from the Lancashire Business Board with the plan

Growth Plan maps out £20bn-plus investment journey

18 Sep 2025

2

Post Office future secured as council explores new options Abington Street Post Office

Post Office future secured as council explores new options

17 Sep 2025

3

Airframe Designs supports new defence strategy with pledge to nurture talent Jerrod Hartley

Airframe Designs supports new defence strategy with pledge to nurture talent

17 Sep 2025

4

Fox Group makes second acquisition since Stellex Capital backing Roger Thistlethwaite, managing director NMS Civil Engineering Limited. Paul Fox, CEO Fox Group. John Flood, Executive Director Fox Group

Fox Group makes second acquisition since Stellex Capital backing

17 Sep 2025

5

Villa at Wrea Green bought for £3.6m by Haythornthwaite family The Villa Wrea Green courtesy of The Villa Wrea Green

Villa at Wrea Green bought for £3.6m by Haythornthwaite family

16 Sep 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
LBV124 September/October Launch Event
MBP Arc Cinema Preston Opening 205
Networking
18 Sep 2025

LBV124 September/October Launch Event

The Arc Cinema, Preston, PR1 2BL

08:30 - 10:30

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

Ladies Lunch
Lancs-cham-logo.jpg.jpg
LBV Hub Networking
18 Sep 2025 - 18 Sep 2025

Ladies Lunch

Lancaster Golf Club, Lancaster, LA2 0AJ

12:00 - 16:00

Cumbria Business Expo 2025
https---cdn.evbuc.com-images-880461633-4862066883-1-original.20241022-110415.jpeg.jpg
LBV Hub Exhibitions
19 Sep 2025 - 19 Sep 2025

Cumbria Business Expo 2025

Carlisle Racecourse, Carlisle, CA2 4TS

09:00 - 15:00

Your Business, Your Region: Making sense of devolution and Local Government Reorganisation
Chorley Council breakfast event new
LBV Hub Networking
23 Sep 2025 - 23 Sep 2025

Your Business, Your Region: Making sense of devolution and Local Government Reorganisation

Worden Hall, Leyland, PR25 3DH

08:00 - 11:00

Preston Freelancer Meet-Up: September
Sept Freelancer (1).png.png
LBV Hub Networking
23 Sep 2025 - 23 Sep 2025

Preston Freelancer Meet-Up: September

Society1, Coworking Space, Preston, PR1 3LT

10:00 - 11:30

Speed Networking with BNI
2.png.png
LBV Hub Networking
24 Sep 2025 - 24 Sep 2025

Speed Networking with BNI

Chorley Football Club, Chorley, PR7 3DU

16:00 - 19:00

The Marketing Meetup IRL: Lancashire - September
TMM Lancashire
LBV Hub Networking
25 Sep 2025 - 25 Sep 2025

The Marketing Meetup IRL: Lancashire - September

Chorley, PR7 2SL

18:00 - 20:00

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) drop-in day
MTD drop in session.jpg.jpg
LBV Hub Seminars
25 Sep 2025 - 25 Sep 2025

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) drop-in day

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) drop-in day, Blackburn, BB1 5QB

10:00 - 16:00

The Marketing Metrics That Matter – Sept 25
Metris 25.09.png.png
LBV Hub Seminars
25 Sep 2025 - 25 Sep 2025

The Marketing Metrics That Matter – Sept 25

Door4 Office, Burnley Wharf, Burnley, BB11 1JG

09:00 - 11:00

Help to grow management course
Help to grow - barriers to growth.png.png
LBV Hub Seminars
26 Sep 2025 - 16 Dec 2025

Help to grow management course

Preston Campus , Preston , PR1 2HE

09:00 - 15:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV124 Online Graphic
Subscribe now

Weekly news bulletin