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Commercial Tenants in Default

Robert Nicholson, Partner in Ashfords LLP’s Property Litigation team, comments

Whilst the usual remedies remain for Landlords faced with commercial tenants who are in default, what can be done and what makes commercial sense are probably two very different things. At the very least the commercial conundrum facing a commercial Landlord in this situation is more complex than most would like.

The remedies available are obvious and well known – whether it is forfeiture or CRAR or county court proceedings, if a commercial tenant defaults the landlord can take steps to seek to recover possession or money.

The first decision is whether, depending on the breach committed by the Tenant, the Landlord wants to pursue possession or recovery of money.

Seeking possession makes sense where there is a buoyant market for the space, so that with vacant possession the Landlord could either sell or re-let (perhaps on better terms to a better covenant).

However, if the market is not buoyant and securing a sale or a new tenant will be difficult if possession is secured, there is only a limited period where business rates will not be payable in relation to an empty building.

In addition, if the building is empty, what is the insurance position – would the Landlord need to enhance and improve security to maintain cover, andwould it also have to arrange regular security inspections?

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