In the current economic climate many commercial landlords will be faced with tenants who fail to pay their rent. There are several ways in which landlords can deal with non paying tenants, including negotiating surrender of the lease, forfeiture, issuing proceedings for arrears, and distraint against goods. The most suitable option will depend on whether the landlord wishes to bring the lease to an end or not. Two options which do not require a court order are discussed below.

Forfeiture
Forfeiture is the means by which a landlord can bring the lease to an end before it expires on the grounds that the tenant has breached a term of the lease. In the case of rent arrears, forfeiture is based on the tenant’s breach of the obligation to pay rent.
A landlord can only forfeit a lease based on rent arrears where the lease contains an express forfeiture clause. Where this is expressed, forfeiture can be affected by peaceable re-entry to the premises without the need for a court order. The usual procedure is to instruct a certified bailiff to enter the premises and change the locks when the premises are empty. The tenant must be notified of the forfeiture and must be given the opportunity to collect any goods left in the premises.

It is possible for a landlord to waive his right to forfeit the lease, for example, if he demands or accepts rent, offers to accept a surrender of the lease or attempts to levy distress against the tenant’s goods. Furthermore, a tenant can apply to the Court for relief from forfeiture for up to 6 months. The Court has wide discretion in this regard and may grant relief where the tenant can discharge the arrears and provides an undertaking in respect of future rent.

Distraint
Distraint is an ancient common law remedy which gives a landlord the power to seize goods owned by the Tenant as security for rent arrears but can only be executed at a property where there is rent arrears. At present, no court order is required and the landlord does not have to give the tenant advanced notice of his intention to distrain. The landlord can levy distress against the goods by holding them until the tenant pays the arrears. If the tenant fails to pay the arrears the landlord can sell the goods. A certified Bailiff can be instructed to levy distress.

Distraint can be a good option for a landlord who does not want to bring the lease to an end (for example where re-letting will be difficult). It should be noted however that a landlord cannot levy distress against goods which are the tenant’s “tools of the trade”. The Tribunals, Courts and Enforcement Act 2007 signals change to the law of distraint. Part 3 of the Act requires landlords to serve notice prior to seizing goods and would permit only certified bailiffs or enforcement agents to seize goods for sale. The Act was given Royal Assent on 19th July 2007. Part 3 of the Act will be brought into force by the Order of Lord Chancellor, but no date has been given at this point.

We at Enoch Evans are happy to advise on each of these options (and others which may apply) at the outset to ensure the best possible outcome.

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