Collection of Commercial Rent Arrears
Dealing With Collection of Commercial Rent Arrears
Over recent years, it has become increasingly more common for businesses to move into a rented property instead of buying a location outright.
This has shown to be particularly common among Small to Medium Enterprises (SME’s) that may not be able to accurately predict their revenue and cash flow.
As cost-effective and straightforward renting may be for businesses, unfortunately, there are times when organisations may fail to pay their rent on time or at all.
When financial difficulties arise and rent goes unpaid, the money that is owed is classed as “Commercial Rent Arrears”.
Commercial Rent Arrears are primarily classed as “Priority Debts”, which can cause especially serious problems if they are left unpaid.
If they are not paid, this could result in serious repercussions such as eviction or being taken to court.
The main two options of Commercial Rent Arrears recovery consist of terminating the lease or attempting to collect the arrears.
This can be a stressful situation for any landlord in England and Wales who are experiencing businesses that have accumulated a number of Unpaid Commercial Rent Arrears.. However, there are a plethora of options that can be used to recover these arrears.
In this article, our team of expert Commercial Debt Collectors have put together the best options for recovering Commercial Rent Arrears.
The Three Ways To Collect Commercial Rent Arrears
Landlords that are Dealing With Collection of Commercial Rent Arrears will need to treat every case on its own merit.
The circumstances of Commercial Rent Arrears and their leases tend to differ greatly, but the main options landlords can choose to deal with the problem are:
Forfeiture, Commercial Rent Arrears Recovery (CRAR) and Pursuing A Guarantor.
Forfeiture, or “re-entry”, is the landlord’s right to terminate the lease if the tenant is in breach of any of its covenants.
If Commercial rent remains unpaid for a specific period of time, the landlord will have the right of forfeiture as outlined in the lease. If the provisions for re-entry within the lease have been satisfied, the landlord can in most cases peaceably re-enter the property and recover possession of the respective premises.
Certified Bailiffs will often perform these actions, which will involve entering the property and changing the locks. As with any situation that could impact you financially, Landlords will need to assess whether it is in their long-term interests to do this.
Where there are not satisfactory goods to cover the Commercial Rent arrears, further action can be taken against the company or individuals by instructing a Debt Collection Agency.
Commercial Rent Arrears Recovery (CRAR)
In April 2014, the common law remedy of distress ceased to exist and a new procedure for the collection of unpaid commercial rent arrears was introduced. This procedure was called Commercial Rent Arrears Recovery (CRAR).
The Commercial Rent Arrears Recovery scheme is an expedient and lawful procedure for Commercial landlords. This allows the landlord to seize and sell a tenant’s goods and chattels to cover the value of the outstanding Commercial Rent arrears.
In order to use a CRAR, the landlord must first provide a 7-day notice of enforcement to the tenants. If no payment has been made at this time, then the landlord may enter the property at their own free will.
There are some limitations on the circumstances in which the scheme applies, but outside of these restrictions, it is viewed as a quick option to collect what is owed.
Pursuing A Guarantor
A guarantor for a Commercial Business is someone who will agree to pay any rent that has become overdue. Guarantors can also be responsible for any damage caused by the tenants and the costs that have resulted from this.
When a person or other business has agreed to act as a guarantor for a tenant, it is entirely at the landlord’s discretion to turn to them for payment. They will also consider pursuing them if the tenant is in arrears of rent.
The Collection of Unpaid Commercial Rent Arrears from a Commercial tenant is always going to be a challenging scenario.
With the right assistance from experienced professionals, it can be well navigated to ensure losses (if any) are kept to a minimum.
If the lease was with an individual then they can be pursued at their home address. Alternatively, if it was a Limited Company then they are still liable for any arrears and action can be taken.
If the collection of unpaid commercial rent arrears is dealt with properly then it can see you reunited with lost revenue.
Have You Carried Out All Of The Above And Still Have Unpaid Commercial Rent Arrears?
If you have tried each method above with no payment forthcoming, the next viable step is to instruct a professional Commercial Debt Collection Agency such as Federal Management.
Using an experienced Business Debt Collection Agency such as Federal Management can help recover any shortfall in unpaid Commercial rent arrears following a commercial tenant leaving the property.
Since 2005, we have assisted a large number of landlords that have experienced problem tenants that have accumulated Commercial Rent Arrears.
Throughout our long history, we have ensured to provide the most cost-effective, hassle-free and efficient service for our clients to ensure the maximisation of recovery.
A Commercial Landlord should never write off unpaid Commercial Rent Arrears even if they are no longer on the premises.
If you are a Commercial Landlord that is owed money and need help with the collection of unpaid rent arrears, give our friendly team a call today for immediate FREE advice and assistance.