18/02/2025

When a commercial tenant breaches their lease it is possible for a landlord to take enforcement action.

A lease is a legal contract between landlord and tenant, which means breaches can be enforced. Most leases follow standard clauses but there can be some variations. Standard clauses generally cover:

• Annual rent
• Review of annual rent
• Insurance
• Rates and taxes
• Utilities
• VAT
• Registration of the lease
• Assignments
• Repairs/decoration

To help landlords understand their rights, I’m going to look at a number of specific clauses, highlighting the enforcement action that can be taken if those clauses are breached by a tenant.

Non-payment of rent by a commercial tenant

Commercial rents can be paid by four equal instalments before the rent payment dates. If payment is not made, default takes place, triggering the default interest clause.

If any annual rent or any other money payable under the lease has not been paid by the date it is due, whether it has been formally demanded or not, the tenant must pay the landlord interest on that amount at the default interest rate. This interest accrues on a daily basis for the period beginning on the due date to the date of payment.

This also triggers the costs clause, which requires the tenant to pay the costs and expenses of the landlord including any solicitors’ or other professionals’ costs and expenses incurred (both during and after the end of the term) in connection with::

• the enforcement of the tenant covenants of the lease;
• serving any notice or taking any proceedings in connection with the lease under section 146 or 147 of the Law of Property Act 1925;
• serving any notice in connection with the lease under section 17 of the Landlord and Tenant (Covenants) Act 1995;
• the preparation and service of a schedule of dilapidations in connection with the lease; or
• any consent or approval applied for under the lease, whether or not it is granted (unless the consent or approval is unreasonably withheld by the landlord).

Non-payment of service charges

Non-payment of service charges works the same way as non-payment of rent with interest becoming payable with the costs clauses triggered.

Re-entry & forfeiture

The landlord may re-enter the property at any time after any of the following occurs:

• any rent is unpaid 21 days after becoming payable whether it has been formally demanded or not;
• any breach of any condition or tenant covenant in the lease;
• an act of insolvency.

If the landlord re-enters the property (or any part of the property), the lease immediately ends, but without prejudice to any right or remedy of the landlord in respect of any breach of covenant by the tenant or any guarantor.

Advantages of taking physical possession may include:

• Quicker recovery of possession than by using court proceedings.
• Less expensive than court proceedings.
• The onus is on the former occupier or tenant to issue a claim against the claimant or landlord to prove why it is still entitled to possession and should be allowed back into possession.

Disadvantages of taking physical possession may include:

• The claimant may not be able to deal freely with the property if there is a risk that the former occupier or tenant may make an application to be reinstated in the property.
• If the former occupier or tenant does bring a claim against the claimant or landlord and is found to be entitled to possession of the property, it may also seek damages to recover the losses it has suffered from being deprived of the use of the property. These may be substantial if a commercial business has been adversely affected.
• The claimant may have to deal with the items left at the premises and may become an involuntary bailee with the obligations that the role entails

Possession proceedings

It is essential that a commercial tenancy is correctly terminated before the landlord starts a claim for possession. There are various ways the tenancy can be terminated:

• Expiry of contractual term
• Operation of a break clause
• Trespass

Court proceedings

A pre-action protocol letter can be sent to the tenant seeking full payment of the monies due, for example, the outstanding rent, interest and costs. If payment is not made, you can issue court proceedings seeking a judgment against the tenant. Remember, you are taking action against the tenant who is still within your premises under the terms of the lease.

Commercial rent arrears recovery

Finally, there is a procedure called commercial rent arrears recovery (CRAR) which is normally undertaken by a High Court Enforcement Officer. The landlord’s common law right of distress against his tenant to recover arrears of rent for commercial premises using the services of a certificated bailiff was abolished on 6 April 2014. The regulations still give commercial landlords a powerful summary remedy, which can be used without the need for court action. The landlord’s common law right of distress has been replaced by CRAR. CRAR only allows a landlord to recover rent arrears and not any service charges. These will have to be recovered through the County Court and obtaining a County Court Judgment which we can transfer to the High Court to enforce.

Need advice on enforcement action when a tenant breaches their lease?

For advice on this or any debt recovery matter, please contact Richard Anderson. You can email richard.anderson@beswicks.com or call us on 01782 205000 or 0161 929 8494. Take a look at our services to find out more about how we can help you.