When a commercial tenant stops paying rent, the landlord has more options available than in a residential case. The tools available include Commercial Rent Arrears Recovery, forfeiture of the lease, and debt recovery proceedings. Understanding how each works helps you choose the most effective approach for your situation.
CRAR replaced the old remedy of distress in 2014. It allows a commercial landlord to instruct an enforcement agent to enter the commercial premises and take control of the tenant's goods to the value of the arrears, then sell them if the debt is not paid. CRAR can only be used for pure rent, not for service charges or insurance premiums, and requires at least seven days' notice to the tenant before the enforcement agent attends. At least seven days of rent must be outstanding before CRAR can be used.
A commercial lease typically contains a forfeiture clause allowing the landlord to end the lease and re-enter the premises if rent is unpaid for a specified period, often 14 or 21 days. Forfeiture of a commercial lease can be carried out by peaceable re-entry, which means physically entering the premises and changing the locks, where the premises are not being used as a dwelling. This can be done quickly but carries legal risk if not done correctly. The tenant can apply for relief from forfeiture, but a landlord who has correctly forfeited a commercial lease is in a strong position.
The landlord can issue a county court claim for the unpaid rent as a debt. This is appropriate where forfeiture is not desired and where CRAR is not practical, for example because the tenant has no goods of value on the premises. A money judgment can be enforced through various mechanisms including a charging order on the tenant's property, attachment of earnings, or High Court enforcement.
Where the debt exceeds 750, a landlord can serve a statutory demand for payment. If the tenant fails to pay within 21 days and cannot establish a genuine dispute about the debt, the landlord can present a winding-up petition (for a company tenant) or bankruptcy petition (for an individual). This is a drastic step and should be taken with care, but the threat of insolvency proceedings often prompts payment where other approaches have failed.
Commercial landlords have several options when a tenant stops paying rent: CRAR allows seizure of goods, forfeiture ends the lease and allows re-entry, debt recovery proceedings produce a money judgment, and statutory demands can lead to insolvency proceedings. The right approach depends on the specific circumstances. A specialist property barrister can advise on the most effective and legally safe strategy for your situation.
If you would like to discuss your situation before making any decisions, we are happy to help. Get in touch with Barrister Connect here.