Rights of landlords in the case of commercial property
RULES AND REGULATIONS GOVERNING A BUSINESS TENANCY AGREEMENT AFTER THE PANDEMIC
IN THE first three months of 2021, £10.5 billion was invested into UK commercial property, according to estate agent Savills.
Commercial landlords, however, were prohibited from evicting their tenants for not paying their rent, and were not allowed to forfeit their commercial leases in March 2020.
This was extended again June 2021 for a further nine months until March 2022, to ensure that tenants who have been unable to open their businesses can come to an agreement with their landlord without the threat of eviction.
What rights do landlords have and what are their responsibilities?
As a commercial landlord, your responsibilities vary from one lease to another, so it is vital you know the ins and outs of these before signing a commercial tenancy agreement.
You are likely to be responsible for the common and external parts of the property, as defined in the lease. This includes fixtures and fittings.
As part of this, you will need to make repairs when necessary, and be responsible for general maintenance and upkeep, gas, electrical and fire safety, as well as general health and safety requirements in the communal areas.
Landlords are also meant to abide by the Code for Leasing Business Premises – a voluntary best practice code – which intends to promote fairness in commercial leases.
I want to evict my tenant. How can I go about doing this?
As with many other aspects of business during the height of the Covid-19 pandemic, the UK government published a new code of practice for landlords and tenants of commercial property across the UK on November 9, 2021.
The code was published in June 2020 to allow nightclubs and hospitality businesses to get the help they needed to recover from the pandemic.
The crux of this voluntary code is “transparency and collaboration” – which encourages tenants and landlords to act “reasonably and responsibly” – to identify mutual solutions where they are most needed.
Commercial landlords and tenants were also able to use the new laws in the commercial rent (coronavirus) bill on March 25, 2022, which established a legally-binding arbitration process for tenants and landlords who have been unable to come to an agreement.
Arguably, the most common reason to evict a commercial tenant is non-payment of rent, perhaps due to the business facing financial difficulties and being unable to pay the bills.
In the first instance, speak to your tenant to see if you can reach an agreement to stop them being evicted.
As a commercial landlord, there are number of steps you must undertake to evict your tenant from the premises.
Your first step is to claim back possession of the property – known as “forfeiture” – where you forfeit the lease using a specific clause in the tenancy agreement, proving that you have a legal reason for stopping the lease and evicting the tenant.
There are two ways in which you can regain possession of your property.
One option is to peaceably re-enter the premises and change the locks. This, however, is a risky option as the tenant
can apply for a “relief from forfeiture” and regain possession from you and potentially claim compensation.
The second option is to apply to the court for possession. This is a more favourable route, but costs and time need to be accounted for. It should be a last resort.
Why are you evicting your tenant?
You should also consider the reasons why you’re evicting your tenant. Have they stopped paying rent? Have they breached the terms of the lease? Or have they breached the repair condition?
If they haven’t paid you rent, you don’t have to give notice to reclaim the property. You can re-enter and reclaim. Do not give your tenant prior warning of your intent to do this, as this could waive your rights to forfeit.
It is recommended you have a commercial property solicitor present, as they can witness you putting a notice of repossession sign on the premises.
If your tenant has breached the terms of their lease – such as by failing to keep the property insured, using the property for residential purposes or making unauthorised alterations to the property – you must serve a section 146 notice1. This notice, which is served by your commercial property solicitor, must be sent to the mortgage provider, the tenant, subtenant and all interested parties. The nature of the breach must be clearly set out, as well as any other requirements such as compensation or remedial action.
If the property is in disrepair, there are a number of rules that apply for notices of breaches of repair.
The landlord must make a possession application in county court. These must be completed and submitted by the landlord and served on the tenant, usually via your commercial solicitor.
Included in the notice is a strict time frame for the tenant to meet the demands outlined in the legal document.
As we continue to see the fallout of the Covid-19 pandemic on businesses, one thing is clear, as responsible citizens, we must all adhere to the law. 1. www.legislation.gov.uk/ukpga/Geo5/ 15-16/20/section/146
Lubna Shuja is the vice-president of the Law Society of England and Wales. She will become the first Asian president in October 2022 and the seventh female president when she takes office.