Commercial rent arrears are one of the most common flashpoints in landlord and tenant relationships. Whether you are a commercial landlord whose tenant has stopped paying, or a commercial tenant struggling to keep up with rent obligations, understanding your legal position at an early stage is essential to managing the situation effectively.
Commercial landlords have a range of remedies available to them where a tenant is in arrears with rent. The right remedy depends on the terms of the lease, the amount of the arrears, and what outcome the landlord is seeking to achieve.
Commercial rent arrears recovery, commonly known as CRAR, allows landlords of commercial premises to recover unpaid rent by taking control of the tenant's goods on the premises. Specific procedural requirements must be followed before CRAR can be used, including giving the tenant seven clear days' notice. Failure to follow the correct procedure can render the use of CRAR unlawful.
Our property law barristers can advise on the full range of remedies available to commercial landlords in rent arrears disputes.
Where a tenant is in breach of a covenant to pay rent, the landlord may have the right to forfeit the lease and recover possession of the premises. Forfeiture is a powerful remedy but one that must be used carefully and in accordance with the terms of the lease and the statutory requirements.
A landlord can forfeit by peaceable re-entry, by physically re-entering the premises, where the premises are not in use and doing so would not involve a breach of the peace. Alternatively, the landlord can issue proceedings for forfeiture. In either case, the tenant has the right to apply to the court for relief from forfeiture, which the court may grant on terms that include payment of the arrears.
For commercial tenants who are struggling to pay rent, acting early and communicating with the landlord is almost always the right approach. Allowing arrears to accumulate without any contact tends to result in the landlord taking legal action sooner rather than later.
Negotiating a rent deferral, a rent reduction for a period, or a payment plan with the landlord is often achievable where approached constructively and at an early stage. Where a tenant believes that the landlord has breached their own obligations under the lease, those breaches may be relevant to the negotiation.
Before issuing court proceedings, both parties should consider whether the dispute can be resolved through direct negotiation or, where that fails, through alternative dispute resolution. Most commercial leases contain dispute resolution clauses that should be checked before any formal steps are taken.
Where the arrears dispute cannot be resolved and proceedings become necessary, both parties benefit from understanding their legal position clearly before those proceedings begin. The costs of commercial litigation are significant, and making decisions about litigation strategy without proper advice risks committing resources to a battle that could have been avoided or settled on better terms.
Whether you are a landlord seeking to recover arrears or a tenant seeking to manage a difficult period, the decisions made in the early stages of a rent arrears dispute have a material effect on how the situation resolves. Taking legal advice before taking any formal steps ensures you understand both the remedies available and their practical consequences.
You can arrange an initial conversation with one of our barristers through our contact page.