When issues arise between landlord and tenants
Either through being lenient or simply a desire to maintain an amicable relationship, landlords may overlook the failure of tenants in commercial properties to fulfil their obligations from time to time. Before long, the result could be an accumulation of rent arrears that have spiraled out of control, or the intended use of the premises has changed significantly from what was originally agreed between the parties.
This will ultimately have a negative effect on both landlord and tenant – in some cases, the failure to manage and enforce obligations in a correct and timely manner can lead to dire consequences such as insolvency or bankruptcy.
By following the right procedures at an early stage, landlords can ensure obligations under a lease are fulfilled by their tenants, or they can claim repossession of their property by forfeiting the lease agreement. This is known as ‘forfeiture and repossession’.
Repossession – What is it?
Repossession is a process that allows a landlord to bring a leasehold agreement to an end by ‘forfeiting the lease’ if the obligations under the lease are not fulfilled. They can then reclaim possession of their property. It is often the last resort after amicable discussion or other methods of trying to resolve any dispute have taken place between all parties.
Following the correct procedure for repossession is crucial. It can also allow for the creation of a new tenancy, or promptly help resolve any breach of obligation with an existing tenant, after starting the process.
How do I claim repossession?
The right for a landlord to claim repossession must be contained in the lease agreement – correctly identifying this in the lease is a first step.
Even if the right is not expressly stated in the lease, the ability to claim repossession may still be available. This depends on what breach of obligation has been committed by a tenant.
Some leases are unclear or ambiguous in how they are worded so a correct interpretation of the lease is crucial.
Once the right to claim re-possession is identified, a notice must be served on the tenant. This is called a ‘section 146 notice’ and it should be drafted correctly. The notice must allow a reasonable time to remedy a breach of the lease.
Failing to follow this step will prevent a landlord being able to claim repossession of their property later on.
If the breach of obligations is unpaid rent arrears, a ‘section 146 notice’ will not be necessary.
Important – Don’t lose your right to claim repossession!
A common mistake made by some commercial landlords is immediately losing their right to claim repossession! This is known as ‘waiving the right’.
After serving a notice on their tenant, landlords might very easily send communications that recognise the existence of the lease. One example, is continuing to demand rent or accept rent after serving a notice on their tenant.
In some cases, a landlord can lose the right to claim repossession permanently. In other cases, a landlord may think they have lost their right, but this is not the case.
Whether or not you have lost the right permanently will depend on what breach of the lease was committed by the tenant.
If in any doubt about whether you have lost your right to claim repossession, or to avoid this from happening altogether, getting legal advice is the best option.
Court proceedings
Once you have identified your right to reclaim possession and correctly served a notice on your tenant, you will have to apply to the Court for an Order granting you possession of the property. You cannot claim repossession without this.
It is worth being aware that commercial tenants can apply to a court to stop a claim for repossession. They will have to convince the Court they will continue to fulfill their obligations under the lease.
Our Property Litigation solicitors can very easily guide you through the process for obtaining an order from the Court.
Other points to note
Forfeiture and repossession of commercial premises is often the last resort after amicably trying to resolve a dispute over a failure to fulfil the obligations contained in the lease. Following these steps correctly can often result in resolving longstanding issues with commercial tenants – commercial tenants are prompted to quickly rectify any breach of the lease to avoid repossession of the property.
Depending on market conditions, a commercial landlord should consider how quickly they might get a new commercial tenant once they have claimed repossession.
It is also possible to gain repossession of commercial premises by peacefully reentering the property. This can result in other problems for commercial landlords and is illegal if carried out forcefully. It is best to seek legal advice before considering this option.
Finally, there are alternative measures to help resolve disputes over unpaid rent arrears. These are beyond the scope of this guidance note but our property litigation solicitors can easily advise on these options.
How can our property litigation solicitors help?
In summary, claiming repossession of commercial premises must be considered carefully and carried out correctly. Should you require any advice to ensure you claim repossession of commercial premises correctly, get in touch with our experienced Property Litigation and Dispute Resolution Department who are happy to assist you.
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