Options for a landlord when a tenant fails to pay rent

27/01/2011

By Mark Steggles, Senior Associate in Dispute Resolution.

There are alternative options to lengthy and potentially costly litigation. The choice of action to be taken may depend on the existing relationship with the tenant and other commercial factors.

Forfeit the lease by re-entering the property without a court order

Traditionally the most powerful weapon at a landlord's disposal has been the ability to forfeit the lease for non-payment of rent.

The right to forfeit without the need for Court proceedings is mainly limited to commercial properties where no part is being used as a dwelling. These rights can easily be lost and this exercise involves careful planning and execution.

Levy distress for rent

At the moment, you can still levy distress for rent. This allows you as the landlord, or a certified bailiff to seize goods at the property which is the subject of the lease and either hold them until the arrears are paid, or sell them and apply the proceeds of sale to settle the arrears.

The law of distress is changing and, when the changes are in force, will be drastically curtailed. There are also restrictions on when how and against what goods distress may be levied.

Make use of insolvency regimes

If the rent is for a sum in excess of £750, you may consider making use of one of the insolvency regimes starting with the preparation and service of a Statutory Demand.

You should always seek specialist advice before taking such action because the insolvency provisions are complex and the implications significant and it may not be the quickest way of recovering rent. Further, if the tenant does become subject to one of the various insolvency regimes, this may prevent other action (including the summary action detailed here) being taken against the tenant.

Look to a previous tenant

It might be possible to look to the original tenant or a predecessor in title to meet the outstanding rent if the current tenant was not the original tenant to the lease. However, there are strict time limits for taking such action and the ability to take action at all depends largely on when the lease was granted. Similar principles apply to guarantors.

Draw from the rent deposit deed

If a rent deposit deed is in place, you could look to draw down from this to cover the rent arrears. The tenant will often be required to top up the deposit in such circumstances. However, there may be good reason not to use such funds, for example if you are aware that repair works will be needed at the end of the lease if the tenant has not carried out any work.

Require sub-tenants to pay rent

If there is a sub-tenant in occupation, it may be possible to require the sub-tenant to pay rent directly to the head landlord for the time that the arrears are outstanding.

Summary

In view of the complexity of the law and the ramifications of opting for a particular remedy, seeking legal advice before taking action is strongly recommended.