Commercial Alerts

Landlords – Be sure to monitor your Tenants!

10-Sep-07

Several recent developments should have your alarm bells ringing if you have commercial tenants occupying your properties.

These developments include the “run” on Northern Rock, the sub-prime scandals in the USA and their aftermath, and the high interest rates for inter-bank lending in the UK – all of which are contributing to a tightening of credit generally and which may be the forewarning of a downturn in the economy.

In your tenants admit they may be in difficulty, or their behaviour (for example, late payments of rental) indicates they may be you may wish to offer relief of some sort, for example by accepting monthly rather than quarterly payments.

More generally, try to keep your “ear to the ground” by monitoring local and national press for indication your tenants may be running into financial difficulties or visiting their premises to check for evidence of problems such as poor window displays or empty shelves. You may get early warning of problems by such actions.

If rentals are not received take stock of the remedies open to you, taking into account the marketability of the premises in question, and the circumstances of the tenant. Then choose the most appropriate remedy from the following:

•Distrain on the tenants possessions to the value of arrears (although this is likely to change with new legislation within the next twelve months)
•Take court proceedings
•Serve a Section 6 notice on sub-tenants (demand that they pay you directly rather than pay through your prime tenant)
•Issus a statutory demand
•Forfeit the lease (by re-entry or court proceedings)

In the case of prospective new tenants take care to check financial credentials and references. If you are concerned consider a rental deposit or a bank or personal guarantee.

Failure to take early action could result in your sustaining permanent losses including rent arrears, being left with empty premises (and incurring consequential losses such as security and repair costs) and lack of future cashflow until a new tenant is found.