I cannot afford to pay Commercial Landlord Rent Arrears?

Many are worrying “they can’t pay the rent arrears to their commercial landlord” and what solutions there are?

Affected by Covid-19?

Many commercial tenants have had to close up shop due to the coronavirus restrictions.

Landlords and tenants who are struggling with rent arrears can access protective agreements.

Interested In Finding Out More About The Debt Solutions Available?

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Need business re-finance help or company closure advice?

Continue reading our article to find out more about how to pay off your landlord debts.

Table of Content

1 What To Do If You Can’t Pay Your Business Landlord?
2 Office Rent or Commerical Lease Arrears
3 What Happens If You Can’t Repay The Business Landlord?
4 What Powers Do Commercial Landlords Have?
5 What Rights Do Commercial Landlords Have?
6 Can Landlords Take Out a County Court Judgement on Their Tenants?
7 Summary
8 Struggling With Other Debts

What To Do If You Can’t Pay Your Business Landlord?

Facing financial difficulties as a business is very common. So if you cannot pay your landlord there is a way you can save your business.

The main solutions to save your business from the landlord’s legal action are:

Individual Voluntary Arrangements (IVA)

Individual Voluntary Arrangements are available to help sole traders or individuals who are struggling with debts.

Many directors sign personal guarantees and these become personal debts so closing down a company is not enough and an IVA for the personal guarantee debts will need to be filed also.

In an IVA, you make an agreement with your creditor to repay your debts involving an insolvency practitioner.

If interested in speaking to a professional IVA debt advisor check out the list of best IVA companies in the UK.

Debt Management Plans

A debt management plan is a great solution to help you reduce your monthly repayments into a single affordable payment plan.

Many company directors sign personal guarantees and these become personal debts to the director, so closing down a company is not enough and a debt management plan for the personal guarantee debts will need to be taken care of also.

The DMP company must be FCA approved so you know the setup with being legislated and regulated for you to enter.

If interested in speaking to a professional DMP debt advisor check out the list of best DMP companies in the UK.

Consolidation Loans

If you can’t repay your commercial rent arrears, you can seek both paid and free professional advice.

Support companies can help businesses to establish any suitable solutions and assess what debts are present and what options are available to pay off creditors.

These professional assistants aid you to source alternative finance that can be helpful in the long-term recovery of the previous debt.

Some of the alternative business consolidation loans could include bridging loans, invoice factoring or business loan solutions.

Company Voluntary Arrangement (CVA)

If your business would be profitable without the business rent arrears debt, then you could arrange a Company Voluntary Arrangements (CVA).

This will allow you to trade and repay the loan in a more suitable timeframe.

If interested in speaking to a professional CVA debt advisor check out the list of best CVA companies in the UK.

Creditors Voluntary Liquidation (CVL)

If a personal guarantee wasn’t signed when you took out your business rent agreement, you could consider closing or selling your company if you struggle to repay your commercial rent.

You can restructure your company and sell it or initiate a Creditors Voluntary Liquidation (CVL) to go into administration and close your business for good.

If interested in speaking to a professional CVL debt advisor check out the list of best CVL companies in the UK.

Office Rent or Commerical Lease Arrears

Whenever you set up a new business, the first thing you need is a place to set up your office.

Many businesses choose a commercial lease from a landlord, paying monthly rent so that you can occupy any premises.

But commercial rent is a major expenditure and it can be easy to fall behind if cash flow is poor from one month to the next.

Being unable to pay your rent payments for commercial leases may lead to enforcement action to recover outstanding commercial rent debts.

So if you’re renting a commercial property what do you do if you can’t pay a landlord?

What Happens If You Can’t Repay The Business Landlord?

If you are not able to pay your landlord’s commercial rent debt, you should talk to your landlord and pay as soon as possible.

They may agree to give you breathing space until you can pay the rent or at least a bit of extra time to pay your commercial lease.

The landlord can take any legal action to recover rent and commercial rent arrears.

This non-payment of rent as a commercial tenant could end in court proceedings and you could end up needing to go to court for unpaid rent.

If the amount you owe is not covered after selling these assets, the landlord can sue you to recover the remaining fee or break off the agreement.

However, if you have a good working relationship with the landlord, your landlord may be willing to try to work the debt out amicably.

If you can assure him that these financial difficulties are temporary and you can pay the commercial rents when business is back on track.

You can come to an agreement between the two of you that you will repay within an agreed timeframe.

Or they could agree to terminate the lease when you fail to pay their rent and you will need to vacate.

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What Powers Do Commercial Landlords Have?

Your landlord has the potential power to take his tenants’ goods and commercial assets in case of falling behind in paying rent.

However, your landlord must send your notice seven days before taking any sort of action. After this first notice, landlords must send another notice to inform you about a seizure of assets in the next seven days.

Your landlord is then entitled to sell your goods that he seized to recover the debt as well as take control of the premises.

This is called the Distraint of Goods, which allows the landlord to sell your assets to pay the arrears.

Seek legal advice if you are unsure as to what power your landlord has over commercial tenants.

With the pandemic continuing, landlords may attempt to maintain commercial property relationships as they may struggle to find others to replace their current tenants for the foreseeable future.

However, this is not to say they can’t or won’t enforce their powers.

Always make sure to pay your rent and assist landlords in making their own payments.

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What Rights Do Commercial Landlords Have?

This Commercial Rent Arrears Recovery (CRAR) benefits landlords in case if rentee is done with the payment.

Landlords can seize goods and other things on business premises.

In effect, they can take any kind of legal steps to get their incentives rents.

Following are the situations in which the landlords can use CRAR legislations:

Their premises are entirely and purely used for business purposes and used residential purposes.
The place has a written lease.
Minor expenses like service changes don’t fall in the category of CRAR and only rents, VAT, and interests can be connected.
The lease that was fixed earlier is not fortified recently.
This CRAR legislation allows the landlords to gain the help of any certified enforcement agent that could help in seizing the goods of the rentee.

Can Landlords Take Out a County Court Judgement on Their Tenants?

Landlords can take out a CCJ on their tenants if they are refusing to make their payments.

The government is attempting to encourage landlords to reach a civil and reasonable agreement with their renters, as opposed to a County Court Judgment.

If the renters continue to refuse or ignore their debts, then it may be the only suitable legally binding agreement, to ensure the landlord gets his owed money.

The government created the Commercial Rents Code of Practice in November 2021, to support otherwise viable businesses.

The code aimed to give landlords and tenants a structured framework to help them resolve any arrears made in lockdown.

Speak with your landlord about any rent disputes and find a resolution, or you may end up with a CCJ and paying court costs.

Summary

When taking out a commercial lease you need to understand if any personal guarantees are signed this can also become a personal debt on your credit file.

The commercial rent arrears recovery companies will check if any personal guarantee is signed when looking to recover rent.

If you have paid a rent deposit and looking to forfeit the lease then all rent deposit payments will be lost.

If struggling to pay rent the commercial landlords will follow a course of action for any non-payment details.

Speak to a professional business debt advisor if your company cannot afford the commercial lease to see all options you have available.

In England and Wales, there are many businesses in the same situation at present and professional debt consultants can assist you with the next course of action to take.

Struggling With Other Debts

Here are some other debt guides if you are struggling with different types of debts: