Recovering rent arrears from a previous tenant
05/10/2010
This case study demonstrates the expertise of our Dispute Resolution team who advise a wide range of commercial landlords in relation to recovering rent
arrears from tenants or other parties. This case study looks at the
ability of a landlord to claim rent from a previous tenant.
Mr and Mrs A own several commercial properties in Kent which are mainly retail units. Mrs and Mrs A are dependent on the rent from their tenants for income.
During the height of the recession, Company Y, a well known retailer who was occupying one of Mr & Mrs A's properties in a high street location, was placed into administration leaving rent arrears in the region of £20,000. There was no realistic prospect of Mr and Mrs A recovering the rent from the administrator. Mr and Mrs A consulted Thomson Snell & Passmore.
The lease was granted by Mr & Mrs A's predecessors in title in 1990 and as such was treated as an ‘old lease’ for the purposes of the Landlord & Tenant (Covenants) Act 1995. The significance of this is that, generally speaking, any previous tenant who enters into a direct deed of covenant with a landlord to observe the terms of the lease is potentially liable for the tenant covenants in the lease (including the covenant to pay rent) for the remainder of the term of the lease despite any subsequent assignment.
Following a detailed investigation as to the identity of all previous tenants, we discovered that one of the previous tenants, Company M, another well known retailer, had entered into a direct deed of covenant with Mr & Mrs A.
We advised Mr and Mrs A to serve the relevant statutory notices on Company M within the appropriate time limit in order to trigger the liability for payment.
Company M paid the full amount claimed by Mr and Mrs A without the need for court proceedings. This was a great result for Mr and Mrs A.
The experience of the Property Litigation team ensured that Mr and Mrs A recovered the rent arrears in a quick and very cost effective manner.