Negotiation of rent, and payment, is one of the most common disputes that arise in a landlord and tenant relationship. It is paramount that both parties are aware of the consequences of late or non-payment of rent, including enforcement action a landlord is entitled to make.
Many commercial leases will feature a rent review clause, which requires that the parties to the lease make periodic re-evaluation of rent on the basis of prevailing market conditions.
Non-payment of rent and forfeiture
Non-payment of rent is a specific ground for a landlord exercising the remedy of forfeiture. Where rent becomes past due, a landlord is not required to provide the tenant who has fallen into arrears with a Section 146 Notice before proceeding with forfeiture remedies. Ordinarily, a Section 146 Notice would be intended to afford a tenant reasonable time to fulfil their obligations under contract.
It is imperative to note that there must be a valid forfeiture clause in the lease agreement in order to use it as a remedy. In many cases, a lease agreement will provide a 14 to 21 day grace period to allow for a tenant to make up arrears.
Commercial property and forfeiture
Where commercial properties are concerned, the landlord is entitled to either (1) peaceably re-enter the premises or (2) seek court proceedings for eviction.
Peaceable re-entry is a cost effective solution where the landlord enters the premises (force is permissible), changes the locks and leaves physical notice that the lease has been terminated on that date.
A landlord engaging in self-help must be diligent in ensuring there are no persons or property remaining on the premises. It is illegal for a landlord to access and change the locks on a premises if there is someone present who objects to the forfeiture. If unaffixed property has been left by the tenant, the landlord may be legally responsible for its safekeeping until the tenant can recover possession.
Residential property and forfeiture
For residential property, a landlord cannot use peaceably re-entry as a means of recovering possession unless it is clear the tenant has vacated the premises and does not intend to return. In almost all cases it is not advisable to use this method for residential property, as a landlord may leave themselves vulnerable to claims for trespass. Instead, a landlord will recover possession of residential property through court proceedings.
Assured shorthold tenancies and non-payment of rent
With regards assured shorthold tenancies, and non-payment of rent is concerned, a landlord may serve a Section 8 Notice upon the tenant. Typically, 14 days’ notice will be afforded to the tenant before eviction occurs.
Relief from forfeiture on the basis of non-payment of rent
Relief can be awarded with regards non-payment of rent, if the tenant pays all sums due five days prior to a court hearing regarding an order for possession. A successful relief from forfeiture will result in the lease being reinstated and the parties returned to the position they were in prior to the alleged breach. Relief can only be awarded by a court, and can be applied for before the relevant County Court or the High Court.
Depending on the nature of the breach and the time elapsed since any court order for possession (usually six months) the courts have varied discretion whether or not to award relief.
A landlord must take care to avoid explicit or implicitly waiving their right to bring forfeiture proceedings for non-payment of rent. This can occur where a landlord accepts rent payments after any agreed rent due date in the lease agreement.
In most commercial leases, a rent review clause will exist. A rent review clause will usually operate within three to five year intervals, to the effect that on that date the parties must assume a new lease at a new rate of rent. Most often the method of assessing the new rate of rent is with reference to the going market rate for similar properties.
A rent review clause will not be engaged automatically. Instead, a lease agreement will provide that the party seeking to initiate rent review must do so by serving written notice proposing a new rent value. If the lease is silent, a statutory override applies to provide a written notice period that parties must adhered to.
Where a landlord makes a proposal for a new rent value, there is no requirement for the suggested amount to be reasonable. However, where the amount suggested is stated to be in conformity with market value, and it transpires it is not, it may serve to invalidate the notice.
Contesting rent value
It is common practice for rent disputes to be referred to Alternative Dispute Resolution (ADR). The most common form is arbitration, where a third party arbitrator will recommend an appropriate rental value which will take into account representations made by the parties in dispute. The recommendation of the arbitrator can be appealed to court.
Contact our Property Litigation Solicitors Mayfair and throughout London Today
Where a tenant falls into arrears and a landlord wishes to move quickly to minimise financial loss, it is a paramount they have an understanding of proper procedure, in order to avoid leaving themselves vulnerable to claims from a tenant. Likewise, in order to avoid a rent review dispute it is advisable for a landlord and tenant to adhere to procedures in accordance with their lease agreement.
At Lewis Nedas, our team of Property Litigation Solicitors have broad experience in both commercial and residential property litigation. We have successfully advised clients with highly complex and multi-faceted cases. To speak with one of our Property Lawyers, please contact us on 020 7387 2032 or complete our online enquiry form.