Commercial Tenant default – Relief for some, headache for others

Commercial Tenant default – Relief for some, headache for others

The last few years has seen a dramatic increase in the number of tenants breaching the terms of their leases. At best this may be relatively trivial, such as paying the rent a few days late, but at worst, major breaches can result in dilapidated properties and major rent arrears.

Whatever the extent of the breach the landlord will generally always have a number of options to weigh-up before deciding how best to deal with the tenant.

One such option may be to “forfeit” the lease – terminating it before the end of the term set out in the lease – and taking possession back from the tenant. Landlords should, however, consider their position carefully before making a decision. If a replacement tenant has not been lined up the landlord will be left with a business rates liability and probably an increase in insurance premium.

There is another downside with forfeiture though. If a tenant subsequently remedies its breach then it can, in certain circumstances, apply to the Court for “relief” – an order granting it permission to re-enter the property and carry on from where it left off. This might sound favourable for a landlord, but if it has already re-let the property to another tenant it is nothing short of a headache.

Please feel free to contact David Tear, head of Property Litigation, for further advice in the area of Commercial Tenant default.

David Tear
Partner, Head of Property Litigation