What is a commercial landlord? A commercial landlord is an individual or entity that owns property intended for business or commercial use and leases or rents that property to businesses or tenants. These properties can include office spaces, retail stores, warehouses, or other real estate designated for commercial activities.
A commercial landlord is responsible for maintaining the property, collecting rent, ensuring compliance with lease agreements, and managing any issues or concerns that may arise during a tenancy. A commercial landlord also has legal obligations, including adhering to safety regulations and addressing repairs or maintenance within the property. Commercial leases typically have different terms, conditions, and legalities compared to residential leases, as they cater to business needs.
When a commercial tenant falls into arrears, the landlord may exercise their right to recover the arrears in a number of different ways. These will be discussed below.
Commercial Rent Arrears Recovery (CRAR) – The Tribunals, Courts and Enforcement Act 2007 Section 72
The Tribunals, Courts, and Enforcement Act 2007 Section 72, specifically focuses on Commercial Rent Arrears Recovery (CRAR). The provision at Section 72 (1) allows a commercial landlord to use procedures in Schedule 12 to recover goods, to the value of the arrears due, without going to court. It must be noted however that the seizure of goods under this legislation only applies to the rent due and payable under the lease (including VAT and interest). The lease must be written and signed, and the tenant must owe a minimum of 7 days rent.
Should the landlord wish to use this method of recovery, they must provide the tenant with 7 days’ notice of enforcement after the rent becomes due. The landlord would then need to instruct Certified Enforcement Agents, to effect seizure of goods. Only Certified Enforcement Agents are permitted to seize goods, under the Act.
High Court Writ of Control
In addition to the CRAR, as discussed above, a commercial landlord may decide to obtain a judgment, which a High Court Enforcement Officer can then enforce. It is important to note, however, that this process will take longer than using the CRAR process. It would be appropriate for a commercial landlord to seek to obtain a court order in one of the following circumstances:
- If the landlord seeks to recover any additional arrears apart from the rent due under the terms of the lease, for example service charges or insurance, as Section 72 only permits recovery of rent due under the lease, and not these additional arrears.
- There is no signed lease agreement, but a signed license.
- If the tenant is no longer at the leased premises, then the landlord would be required to obtain a High Court Writ of Control, as under the Act, the enforcement agent is only permitted to seize goods at the leased premises. The seizure of goods could then be effected by the enforcement agent at the tenant’s new business address.
A commercial landlord may decide to serve the tenant with a statutory demand, which provides the tenant with 21 days to make repayment of the arrears. Failing the tenants’ repayment, the landlord can then apply for a winding up petition against the tenant’s company. The landlord may also seek to obtain a bankruptcy order. A statutory demand can be an effective way to obtain repayment of rent arrears.
A commercial landlord may issue proceedings and seek to obtain a judgment for rent arrears. The landlord should however consider whether it is worthwhile taking this route, as if the judgment is granted, the tenant still may not pay. The landlord would then need to have the judgment enforced, which would only be a viable option if the tenant has any assets of enough value to cover the arrears. If the tenant does not, then the landlord is at risk of losing more money, as it can be costly to issue proceedings and to enforce the judgment. There are also several procedural steps that must be followed prior to issuing proceedings, in compliance with Pre-Action Protocol under the Civil Procedure Rules.
A commercial landlord may also exercise their right to forfeit a lease, by way of peaceable re-entry to the property. Forfeiture, however, may not be the most preferable option for a landlord, as unless they have secured a new tenant, forfeiture could prove to be expensive, and financially detrimental.
In conclusion, as we have explored there are several options available to commercial landlords, seeking to recover rent arrears. It would appear that Section 72 of CRAR would be the most beneficial and cost effective route for the landlord to use if this option is available to them, as it is relatively straightforward, and likely has the best prospects of recovering goods to the value of the arrears.
Disclaimer: The information on the TV Edwards website is for general information only and reflects the position at the date of publication.