Business Lease Transactions
Business property/lease transactions FAQ for landlords
My tenant is behind in his rent what can I do?
There are a number of remedies open to you as a landlord although in the current market many are not as attractive as they have been in the past.
First establish whether or not this is the original tenant under the lease. If not then you may be able to claim against the prior tenant(s) depending on the age of the lease but in order to do this notices have to be sent out to these parties within six months of the current tenant’s debt or default occurring.
If there are no prior tenants do you have any guarantees, be they personal, by way of a bank or other guarantee, or by way of rent deposit? In this case again look to see what the terms of the guarantee are and make sure that appropriate notices where required are immediately sent out to ensure that you can make a claim against them.
If all of the above are exhausted and the tenant is still in arrears then you must decide if you want to take action to repossess the premises. In the current market, many landlord’s are unwilling to do this as they feel that they will not be able to find a new Tenant and do not want to find themselves not only not receiving any rent but also being liable for the business rates and other outgoings such as insurance and security costs for the premises.
If you do not want to repossess then you may as an alternative get bailiffs to attend the premises and seize sufficient goods or take action against the tenant or sue for the debt in the court in the way you would against someone who was not your tenant but owed money to you.
All the above though will ultimately be dictated by the true financial position of the tenant because if they cannot pay the money and there is no guarantee, then you maybe throwing away good money after bad. Indeed this is the reason why many landlords have in the current recession agreed to vary the rent terms of leases as a temporary measure to enable tenant’s to continue in occupation albeit at a reduced rent until their business and/or the market recovers.
The tenant is letting the premises deteriorate what can I do?
Instruct a surveyor and arrange for a proper schedule of the works required to be prepared and then sent to the tenant requiring the him to undertake the works within a reasonable period of time failing which (1) you will do them and charge the tenant (if the lease provides for this) or possibly (2) the lease will be forfeited. Whether you wish to do this depends on a number of factors and specialist advice is generally required.
The tenant has disappeared. How do I get the premises back and/or claim against an old tenant?
If the tenant has left owing rent then the leases can generally be forfeited. If not then there may have been a surrender of the tenancy by implication, but specialist advice should be taken on that. Once the lease has been forfeited or there has been a surrender then the obligations of the tenant for the property going forward cease at that point. The tenant remains liable for any unpaid rent, dilapidations, other losses etc.
There may be a claim against a former tenant under the Licence to Assign the lease or pursuant to s17 of the Landlord & Tenant (Covenants) Act 1995 or (in the case of older tenancies) under the general law for unpaid rent, dilapidations etc.
The lease will be coming to an end shortly what are the options open to me?
This depends upon whether the lease is protected by the security of tenure provisions of the Landlord and Tenant Act 1954 or not.
If protected then notices have to be served in compliance with the Act to terminate the tenant’s rights to remain in the premises and have a new lease granted to it.
These notices have to be considered in detail before they are sent as only certain grounds will be open to a landlord who does not want the tenant to stay because of reasons such as poor past performance or intended redevelopment and if the landlord is happy to grant a new lease the notices now have to outline the basic terms such as rent and length of time that the landlord is willing to grant on the renewal. There are also strict requirements as to the length of notice and timing that need to be considered so we would suggest that if you are about to embark on this that you speak to one of our Business Services’ solicitors so you do not fall foul of the legislation requirements.
If the lease has been validly excluded from the Landlord and Tenant Act 1954 protection then the tenant will have no right to remain the premises after the contractual term of the lease has expired. Whether you wish the tenant to vacate then or are happy to grant a new tenant to them is up to you as the landlord. But again before the lease expires speak to one of our Business Services’ solicitors so that we can advice you on the best means of protecting yourself whatever you intentions are. It is all too easy to unwittingly allow a tenant to remain in occupation and create a new tenancy which is protected then by the Landlord and Tenant Act. Do not accept rent or other payments from the tenant after the lease has expired without taking advice.
How do I instigate a rent review?
This will depend on the terms of the lease. Many older leases provide for a notice to be served by the landlord quoting a suggested new rent and inviting the tenant to agree or disagree. This form of rent review though due to the drastic effects it had on tenants who failed to serve a counter-notice has now become less prevalent. The modern review clause will usually simply allow either side to trigger the rent review process by beginning the negotiations with a fall back position if it cannot be agreed for referral to an independent surveyor to determine. The surveyor will act either as an expert or an arbitrator. Initially then look at the rent review clause and see what you will be dealing with. If a formal notice is not required arrange for your surveyor to possibly visit the premises so that he can assess them and then advise you on what he considers is the current market value of the premises. To do this he will need have a have a copy of the lease so that he is fully aware of the factors that have to be taken into account and disregarded under the review provisions. If either he or you have any queries then please contact us. If a formal notice is required then again please contact us and we will arrange for the notice to be served in accordance provisions of the Lease and advise you of any trigger dates to be noted following the service of the notice.
The tenant wants to assign/underlet - what are my options?
This will depend in part upon the age of the lease. If the lease predates 1st January 1996 then the lease will set out the terms for a licence to be granted but where consent is said to be required it is likely that consent cannot be unreasonably withheld or delayed.
If the lease is dated on or after 1st January 1996 then the lease will come under the provisions of the Landlord and Tenant (Covenants) Act 1995 and as this ended the doctrine known as first tenant liability the lease may contain certain requirements to be fulfilled some of which are absolute and others which are subject to consent not to be unreasonably withheld or delayed. For example an absolute requirement may be that there are no rent arrears, that the assignee is not a group company or does not have diplomatic immunity.
You are entitled to request full financial information for the tenant and other relevant information but will need to make a decision within a reasonable time and give reasons for that decision. If you ignore the application, take too long to deal with it. Or do not give reasons for any refusal the tenant can apply to court for a declaration that you are unreasonably withholding or delaying consent.
The tenant has served a section 26 notice on me - what do I do next?
A section 26 notice is one by which the tenant brings to an end the lease he holds or any statutory continuation under the 1954 Landlord and Tenant Act and he wants to be granted a new lease. It is more usual for a tenant to serve this where he believes that he will achieve a lower rent that he is currently paying on the renewal or due to his own business requirements needs the certainty of a completed lease for a fixed term.
You will need to decide whether or not you want to grant a new lease and on what terms.
If you do not want to grant a new lease then please contact us so that we can advice you as to whether or not you have grounds to refuse the grant. You only have two months from the time you receive the notice to object so you need to act quickly.
If you are willing to grant a new lease we would suggest that once we have confirmed that the notice is validly served that you then take advice from a surveyor as to the terms of the new lease you are prepared to grant and commence negotiations with the tenant.
It will be for the landlord or tenant to apply to the court should terms not be agreed or if there is a dispute as to whether the tenant should be granted a new lease at all and if an application is made then please contact us so that we can ensure your position is protected in the court proceedings.
It is advisable to speak to one of our Business Services’ lawyers to discuss your options before you respond to the tenant.