Your landlord's rights
The problem
Your landlord has served you with notice that he wants you to carry out repairs to your premises. Cash-flow is difficult right now and you would rather put repairs off until things pick up. Also, the next quarter's rent is due, but you are thinking of putting payment off for a few weeks as you have other expenditures to deal with. You like the premises and would like to stay there. What is the worst that your landlord can do?
The Law
There are a number of things your landlord can do if you fail to observe the repairing covenants of your lease, or if you do not pay your rent.
Forfeiture is a landlord's right to re-enter your premises and bring your lease to an end, following a breach by you of any of the covenants in the lease. Forfeiture is not automatic; it exists only where there is a written forfeiture clause in the lease. Most commercial leases have such a clause.
Let us assume for now your lease contains such a clause.
The procedure which a landlord has to use to forfeit a lease depends on whether a tenant has not paid the rent or whether he is in breach of any other clause in the lease.
For breaches of covenants other than non-payment of rent (such as your failure to repair), it is necessary for the landlord to, first, issue a particular type of notice, called a Section 146 Notice (Section 146 of the Law of Property Act 1925).
The notice will specify the breach - meaning, the disrepair that the landlord requires you to remedy and by when. The notice may require you to pay compensation, together with your landlord's surveyor's and solicitor's costs.
If you do not carry out the repair set out in the Section 146 Notice, your landlord can issue court proceedings for forfeiture and to obtain an order for vacant possession of the property.
The law has placed restrictions on a landlord's ability to forfeit for disrepair if you have more than seven years left on your lease. If the landlord takes court proceedings, the tenant can seek relief from forfeiture from the court at any time before the landlord re-enters the premises. Relief from forfeiture means that the court puts your lease back in place.
Relief is granted at the court's discretion. It will examine your conduct and would normally want to ensure that the repairs will be or have been done, rent is paid up to date, and all your landlord's costs are paid.
The procedure is different if you fail to pay your rent.
If you are behind with your rent, your landlord does not have to serve you with a Section 146 Notice. Your landlord can immediately issue proceedings for forfeiture and possession. What is of more concern is that the landlord may re-enter the premises and change the locks, locking you out, without any notice.
It would still be open for you to apply for leave for forfeiture.
Expert advice
If you want to keep your premises, treat your rent as a priority expenditure. If you really cannot afford to pay your rent, it is probably best that you contact your landlord before falling into arrears.
Not many landlords will tolerate non-payment for long, and you may have to consider giving up your premises, if your landlord agrees that you can do so. Before considering this, you should take legal advice.
If your landlord serves you with a schedule of repairs to be carried out and you cannot afford to do them, you should speak with your landlord before you receive a Section 146 Notice from him. Receiving a notice would only add to your expenditure.
Agree a schedule of repairs with your landlord over a longer period. Make sure you can deliver whatever you agree to, then stick to it.
Check list
If you value your premises, do not fall behind on your rental payments.
If you are unable to deal with repairs requested by your landlord, speak with him before he begins enforcement proceedings.
Before acquiring a commercial lease, check that you understand the obligations in it, and your landlord's powers if you fail to keep to them.
If you are likely to have difficulty complying with the covenants in your lease, speak to your solicitor or surveyor, who can advise you properly.
Beware!
Many leases granted to a company are guaranteed by an individual. If the business fails to keep to its obligations within the lease, a landlord can pursue the individual and seek to recover his rent and/or damages from that individual's personal assets, which will include their home.
Contact
Paul Dunbar, Rooks Rider
020 7689 7000
E-mail: pdunbar@rooksrider.co.uk
