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Debt Collection: Getting it Right

Alan Hamblett, Partner at Corclaim, comments

You are a landlord of commercial property and are owed money by your tenant. How do you collect that money whilst maintaining your reputation for fairness?

The first point to make is that fairness works – or should work - both ways. A commercial tenant is running a business and juggling several demands for payment at any given moment and cash may be tight. It would not be fair though if they took advantage of a generous landlord by paying off others first, simply because they shout louder. It is reasonable to expect that a tenant who is struggling to pay bills would speak to creditors and offer an explanation and a payment plan.

A reasonable landlord would listen to that explanation and if it is plausible, would negotiate a realistic payment plan. As long as the position does not deteriorate, it should not be necessary to bring in the bailiffs or go to court.

What do you do though if the tenant refuses to talk to you or if the position deteriorates after agreeing a payment plan?

The relationship between the landlord and the tenant is governed by the terms of the lease. It will generally say that the tenant must pay rent on the usual quarter days and must pay service charges quarterly in advance. It will also say that the tenant must pay interest on any overdue sums. It should also contain a “proviso for re-entry”, which will entitle the landlord to take back possession of the premises in the event of any default.

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