“There are many options available to landlords who are concerned their tenants may be struggling to pay their rent. But sometimes it may be more sensible to just recover possession of the building while you still can, before the legal process takes over”, warned Louise. She said that if the commercial landlord was determined to take an official stance, they should think carefully about what steps to take.
“If your tenant paid a rent deposit when they took on the lease, you will probably be entitled to use this to cover the rent due. And if your tenant has someone who stands as a guarantor to the lease, you can call on them to pay the arrears.” Louise also said landlords may be entitled to seize, impound and sell any goods belonging to the tenant, or you could choose a right of re-entry and take back the tenanted property itself.
“If you decide to take court action and claim against the tenant to try to recover the debt, this is unlikely to be much use if the tenant is about to become insolvent. But if the property is sub-let, then in some circumstances the main landlord can ask an under-tenant to pay its rent directly to them and cut out the middle man.” Until your tenant is formally declared insolvent, landlords are entitled to use any of the options available to them. However, it becomes far more difficult after the tenant has been declared insolvent.
“After the declaration, some remedies will only be possible if the insolvency practitioner or the courts give their permission – this is likely to be a long and expensive process, and permission is not always given. You may even find yourself in the difficult position of being unable to do anything with the property, with no right to take it back, and with a tenant who is in arrears. This is of course made even worse if you have a new tenant ready and waiting to take a lease on the property. Think carefully about the options available to you before you even start any formal proceedings – you may decide it’s not worth the stress, cost and time to pursue someone who will never be able to pay up.”
Taking legal action after a tenant has been declared insolvent can therefore leave you in a worse position than if you just cut your losses. To read more about Martin Kaye’s commercial property department, visit http://www.martinkaye.co.uk/