Watford Solicitors

My tenant is not paying his rent, what can I do?

It is worth considering the following points and options :-

• Who can you pursue – just the existing tenant or previous tenants or guarantors. Should they all be pursued ?
• Rent Arrears proceedings
• Forfeiture.
• Bankruptcy or Winding-up.

It is worth considering the following :-

• What does the Lease state (for forfeiture to operate there must be an express clause allowing this)
• How much rent is outstanding and how long it has been in arrears?
• Can the defaulting tenant pay?
• If it is an old lease, is the original tenant under a continuing liability and/or did any previous assignees covenant with the landlord direct ?
• If it is a new lease, is there an Authorised Guarantee Agreement (AGA) ?

What is forfeiture ?

If the tenant breaches the terms of the lease then the landlord has the right to forfeit the lease – which means bring it to an end. If the breach is non payment of rent and the premises are used for business purposes then forfeiture can be effected by the landlord re-entering and simply changing the locks – generally speaking bailiffs would be employed for this purpose. Alternatively the landlord can obtain a court order first.

If the breach is anything other than non payment of rent then before the right of forfeiture can be exercised the landlord has to serve on the tenant a notice specifying what the breach is and giving the tenant a reasonable time to remedy the breach – if the breach is remedied then the right of forfeiture is removed

What problems can arise with service Charges ?

Where a Tenant is taking an industrial unit, office in a block or shop, the lease will usually provide for the payment of service charge in addition to rent. This should represent a fair contribution by the Tenant towards the cost of maintaining and renewing the building of which the Tenants premises form part. The Service Charge may include the cost of maintaining and even replacing/rebuilding the roof, walls and foundation of the building, estate roads, common corridors, staircases, lifts, maintenance and repair of fire fighting and safety equipment, cost of heating, lighting and security of common parts, external decoration of the building, managing agents fees. It can be very expensive, so great care should be taken to find out the position and to negotiate on this issue

As part of pre-lease negotiations, the Landlord should be asked to produce the Service Charge accounts for the 3 years at least, an estimate of the Service Charge in the current and forthcoming year and full detail, with costing, of any anticipated/future expenditure. Options for the tenant include :-

• seeking to cap the contribution to Service Charge either as a fixed annual sum or as a percentage of the rent
• to see whether the Landlord is prepared to accept an increased rent to include Service Charge and Insurance Rent
• with shops to negotiate that the tenant will not be responsible for any structural repairs or improvements

Tenants Repairing Obligations

It is generally (but not always) the position that the Tenant is responsible for maintaining and repairing the premises throughout the period of the Lease (damage caused by insured risks excepted) and returning them to the Landlord in good repair and condition when the Lease comes to an end. This can be a very expensive obligation for the Tenant. The extent of this liability is a matter for negotiation with the Landlord and will depend upon the age and type of the property, the amount of the rent, the length of the Lease, the physical condition of the premises before the Lease commenced and the extent and cost of fitting out works.

It is more common where a Tenant takes a lease of a whole building for him/her/they to be required to repair and maintain the property internally and externally, which will extend to roofs, foundations, external load bearing and other walls, floors, ceilings, Landlords fixtures and fittings and all other parts of the structure including, for example, gutter and down pipes. A tenant of such a building should however insist upon excluding liability for ‘inherent defects’ in the property such as design and construction faults and that liability should be restricted to repair and maintenance so as not to include renewal and/or rebuilding.

If a Tenant is taking a Lease of part only of a larger building, the tenants repair obligations are usually limited to the interior of the property (and shop front, if any)n and the Landlord should have an obligation to maintain the structure of the building and common parts (if any). The Landlord may or may not seek to recover a proportionate part of the cost of these liabilities from the Tenant by way of a Service Charge.

Before signing a lease, a tenant will be well advised to check and negotiate on responsibility for :-

• internal and external maintenance and repair.
• ensuring the building meets fire, and health and safety regulations
• insuring the building
• making sure the premises have the right use classification for your business
• ensuring the premises meet the access requirements of the Disability Discrimination Act
• the rent. When will the rent need to be paid ? It may be weekly, monthly or quarter payable in advance or in arrears
• is there a deposit to pay? If so how much, and when is it refunded, on what terms and is it held separately from other landlord monies ?
• does the rent include rates, building insurance or other insurance?
• are service and maintenance charges included? does this include cleaning?
• are any shared services such as parking, security, reception staff included?
• are utilities (gas electric, water, phone/communication lines, air conditioning) included ?
• how often, and when, will the rent be reviewed?

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