Landlord and tenant disputes can be bitter and expensive, for both parties.
Landlords are often faced with the choice of trying to recover outstanding rent and/or trying to recover their premises and get the tenant out, accepting that he might be better off taking it on the chin and getting a new tenant in.
Getting tenants out can be slow, though.
Generally the failure to pay rent by the tenant will be a breach of a covenant of the lease leading to a right accruing to the landlord for a straightforward breach of contract and the normal remedies available to the landlord when this occurs.
Recovery of Premises
Generally, you will find that most commercial leases will have a covenant providing for the right to recover possession of the premises when there is a breach of a covenant of the lease.
Notice To Quit
If a lease has just expired, that is the time is up, the landlord needs to serve a Notice To Quit giving whatever period of notice is stipulated in the lease itself.
After the service of the Notice To Quit the landlord should mark any rent received as “mesne rates only” as not to do so could be seen as a waiving of the Notice by the landlord.
Forfeiture procedure is appropriate where the landlord wants to get the tenant out before the term of the lease is up. He will want to do so if the rent is overdue and not being paid and the landlord thinks that he is better off trying to let the premises to someone else.
To do this the landlord must be sure that the lease makes provision for forfeiture in the event of rent not being paid or whatever other breach of covenant the landlord is alleging. Most leases will contain such a covenant; if yours does not it will provide for forfeiture for breach of a condition of the lease.
In order to use the forfeiture procedure the landlord must first, by law, give the tenant the opportunity to remedy whatever breach has occurred.
Firstly the landlord will need to serve a Notice of Forfeiture on the tenant which will set out the alleged breach and the time within which it must be put right or that the landlord will re-enter the premises.
This is called a Section 14 notice as the requirement arises from section 14 of the Conveyancing Act 1881.
If the remedy is not forthcoming and the breach is not sorted out then the landlord can re-enter the premises peaceably-it is important that to note that anything other than the minimum damage can lead to a criminal offence being caused by the landlord.
If resistance is offered by the tenant then it would be very difficult for a landlord to enter peaceably and should withdraw.
Ejectment Civil Bill on Title
If the landlord cannot take the premises peaceably he will need to go the Court route and it is by way of Ejectment Civil Bill on Title. Be warned that this is a slow process and the Courts have traditionally given a fair degree of latitude to tenants giving them more time to put things right.
Conveyancing Act 1881, section 14(2), provides some relief for the tenant provided that the landlord has not re-entered and the tenant has put matters right by paying the rent or whatever breach is alleged.
The courts have traditionally been very fair with tenants in these matters and a tenant who has paid up, even late, will be in a strong position to get this statutory relief from the Court.
Commercial Landlord and Tenant Issues in Insolvency and Liquidation
In a liquidation situation, any rental arrears which arose prior to the liquidation will rank as unsecured claims and participate in any dividend on a pro rata basis with other unsecured creditors.
Rent arising where the liquidator occupies the premises to wind up the failed company is deemed to be an expense of the liquidation and will rank, along with the costs of the liquidation, above all creditor claims.
Rent accrued prior to the appointment of the receiver will rank as an unsecured debt.
Rent due during the period of receivership, the receiver is obliged to pay the rent as a priority expense of the receivership.
Theoretically, rent accrued during examinership should be paid to the landlord. However, proceedings cannot be taken against a company when it is in examinership so it would be very difficult to enforce the payment of rent.
Repudiation of leases during examinership
Section 20(1) of the Companies (Amendment) Act 1990 allows the repudiation of any contracts of a company in examinership.
This includes leases and a Court has jurisdiction to approve the repudiation of a lease of a company in examinership. This is a discretionary power which will be exercised in each case in the particular circumstances of the case.
Disclaiming a lease
Section 290 of the Companies Act 1963 allows a liquidator to apply to Court for an order for disclaimer of onerous property or contracts.
The liquidator has 12 months within which to disclaim a lease and it is a slow process. The landlord will be able to claim as an unsecured creditor for damages as a result of the disclaimer.
However, whether there is going to be a dividend available to unsecured creditors or not will depend on the circumstances of each case.