Many tenants are likely to have been adversely affected by the economic downturn and may, as a consequence, be struggling to pay the rent due under the terms of their lease. This update sets out the key issues that a landlord should be aware of if a tenant fails to pay the rent due under the terms of a commercial lease.

·     The tenant may become liable to pay interest (often at a rate higher than bank base rate) on the unpaid rent.

·     The tenant may be liable to pay damages to the landlord.

·     The Landlord may be able to re-enter and obtain possession of the property.

·     The tenant may be unable to exercise a break clause in the lease or tenancy agreement while there are rent arrears.

·     The Landlord may be able to take steps towards having an individual tenant declared bankrupt or a corporate tenant wound up.

·      If the tenant has persistently delayed paying you rent, the landlord may be able to block their application for a renewal lease. 

·     The Landlord may be able to take action against the current tenant’s guarantor, a former tenant, or even a former tenant’s guarantor to recover the unpaid rent. The Landlord will have to serve notice in a specially prescribed form in order to seek payment from a former tenant (or its guarantor).

·     The tenant may be liable for the Landlord’s costs arising from, or in connection with, the breach of their obligation to pay rent under the terms of the lease.

If you would like to discuss any of the issues in this note, please contact a member of the Commercial Property Team on 01639 640549 or email Helen.vanwillegen@hutchinsonthomas.com