Understanding Your Rights as a Commercial Landlord

As a commercial landlord, it’s essential to know your rights to protect your investment. Whether you’re dealing with missed rent payments or issues with tenant conduct, being aware of your legal standing is crucial. Let’s explore the rights you have under UK law, using some real-life examples to illustrate the key points.

1. Your Right to Collect Rent Payments

As a landlord, your fundamental right is to receive rent in full and on time. To safeguard this right, it’s important to establish clear rent collection procedures, including the payment schedule and any penalties for late payments. This helps maintain consistency and minimises potential disputes. This supports positive tenant relationships while protecting the landlord’s financial interests. Clear communication and thorough documentation are crucial to avoiding misunderstandings and legal disputes. However, what actions should you take if your tenant becomes unable to meet their rental obligations or falls into arrears?

Consider this scenario: A small business renting a unit in your commercial property suddenly starts missing rent payments. Unfortunately, situations like this have become more frequent for landlords, particularly after the COVID pandemic and ongoing economic pressures. In such cases, UK law offers landlords several options to address the issue. These include pursuing legal action to recover the unpaid rent or, if the non-payment continues, initiating forfeiture proceedings to regain possession of their property.

Case Study: A commercial landlord in Manchester experienced this with a tenant running a café that was struggling due to increased competition. The tenant fell behind on rent for three months. The landlord first tried to negotiate, but when payments still didn’t come through, they used the Commercial Rent Arrears Recovery (CRAR) procedure, which allowed them to seize items from the café to recover part of the unpaid rent. It’s a reminder that landlords have solid options, but it’s important to follow legal processes carefully to avoid counterclaims.

2. Right to Forfeiture: Taking Back Possession

Forfeiture is a powerful right that allows landlords to take back possession of a property if the tenant breaches the lease. For example, if the tenant is using the premises for something unauthorised (like turning a retail shop into a nightclub), you have the right to act.

Forfeiture is complex due to strict legal procedures, such as issuing a formal notice and allowing the tenant to remedy the breach. Incorrectly following these steps can lead to wrongful eviction claims or the loss of the right to reclaim the property. Legal advice is crucial.

Case Study: In a notable case, a landlord in Liverpool faced a tenant who was using their office space for unapproved purposes, hosting events that breached the lease. The landlord served notice to forfeit the lease. The tenant tried to contest this, but because the landlord had followed the proper legal channels, the court upheld the forfeiture. This case highlights the importance of understanding and correctly exercising your right to forfeit, as it can result in regaining control of your property when lease terms are broken.

3. Recovering Service Charges and Maintenance Costs

Service charges often cause friction between landlords and tenants, particularly regarding the maintenance of communal areas or major repairs. However, landlords have the right to charge for these services as long as they are clearly outlined in the lease agreement.

Let’s say your tenant operates a shop in a building where you’re responsible for maintaining the exterior. If they refuse to pay the service charge after repairs are made, you can legally demand payment, provided the lease covers this.

Case Study: A London landlord  faced resistance following an invoice to a tenant for façade repairs, but the tenant disputed the charges as excessive. However, the court ruled in favour of the landlord because the lease clearly stated the landlord’s right to recover repair costs through service charges. This highlights the importance of clear lease agreements to prevent payment disputes.

4. Managing Tenant Breaches

Tenant breaches are common in commercial property leasing, such as rent arrears, unauthorised alterations, or misuse of the property. As a landlord, you have the right to take action, ranging from demanding the issue be resolved to terminating the lease.

Case Study: In Birmingham, a landlord discovered that their tenant had made substantial alterations to the interior of a retail unit without permission. The tenant had removed walls and installed heavy equipment, violating the lease agreement. The landlord issued a notice to have the changes corrected. When the tenant refused to comply, the landlord proceeded to forfeit the lease. The court  decided in favour of the landlord’s actions, emphasising the importance of both parties strictly adhering to the lease terms.

5. Safeguarding Your Interests with Robust Lease Clauses

A clear and concise lease agreement is the best way to protect your rights. Important clauses, such as rent review provisions and subletting restrictions, provide crucial protection. For example, a rent review clause enables you to adjust rent periodically to align with market conditions. Without this, you could be locked into outdated rental rates, particularly if property values in the area increase.

Case Study: A commercial landlord in Leeds included a rent review clause in a long-term lease for a prime high street property. When property prices in the area surged due to regeneration, the rent review clause enabled the landlord to increase the rent to match the market rate, preventing financial loss.

6. Eviction and Repossession: Enforcing Your Rights

In cases of non-payment or significant lease breaches, eviction may be necessary, however, UK law requires landlords to follow proper legal procedures, such as serving the correct notice and obtaining a court order. Failing to adhere to these steps can lead to wrongful eviction claims, so landlords  should follow the proper procedure and seek advice to ensure compliance and protect their rights.

Case Study: A landlord in Manchester faced a situation where a tenant refused to vacate after the lease had expired. The tenant asserted a verbal agreement to remain, but because the landlord had properly served the required notices and adhered to the legal repossession process, the court ruled in favour of the landlord. This case serves as a reminder that landlords are entitled to enforce their rights, provided they follow the correct legal procedures.

At mlplaw, our property litigation team has vast experience supporting landlords through every stage of the commercial leasing process, from drafting leases to handling tenant disputes. We’re here to help you protect your interests and get the most out of your commercial property, please email us at disputeresolution@mlplaw.co.uk