Evicting commercial tenants
If you are a commercial mortgage holder or commercial landlord, the chances are that, eventually, you will need to end the lease early and evict your tenant. This is common in instances where the tenants usually stop paying their rent. The process of evicting commercial tenants early is known as ‘forfeiture’ of the lease. We have discussed in previous articles as to how you may evict residential tenants and the process to follow.
If you are a tenant, it is also important that you know about the rules for eviction from your property, as your business could be at risk if your landlord forfeits the lease.
What to do about non-paying commercial tenants
The most common breach of a commercial lease is non-payment of rent; however, it is also common to find lease terms that allow for forfeiture for other reasons, such as abandonment, any form of insolvency, using the premises for an illegal or unauthorised purpose or breaching or failing to comply with any other terms of the lease.
You can only forfeit a tenancy if the lease contains a forfeiture clause.
The safest way when it comes to evicting a commercial tenant is by commencing a possession claim in the County Court. This process however can take some months. If on the other hand the lease allows it, it can sometimes be cheaper, quicker and simpler to exercise ‘peaceable re-entry’.
Commercial tenant eviction through peaceable re-entry
Peaceable re-entry entails physically entering the premises yourself (or perhaps, more advisably, hiring bailiffs to do so) and changing the locks so that your tenant cannot re-enter the property. You should take care if going down this route; if the forfeiture is found to be unlawful, exercising peaceable re-entry could constitute trespassing and your tenants may have a claim against you, which could be very expensive if this has caused damage to their business. Make sure you take legal advice before you proceed.
Breaches other than default on rental payments will generally require that you serve notice as stipulated in section 146 of the Law of Property Act 1925: ‘Restrictions on and relief against forfeiture of leases and underleases’.
Protection from eviction
It is illegal to evict a tenant by any means other than a court order where all or part of the property is lawfully occupied by a residential tenant. This extends to mixed-use property, such as a flat above a shop if the whole property is let under the same tenancy agreement.
Therefore, you will be unable to forfeit the lease on a mixed-use property by exercising re-entry unless the residential element of the premises is unoccupied at the time of forfeiture.
How to exercise peaceable re-entry
Provided that any required notice has been served and the prescribed time frame for your tenant to remedy the breach of lease has lapsed without adequate action, you can then seek to re-enter your property.
Some points to consider at this stage before you re-enter the property and evicting commercial tenants are as follows –
- Check that no-one is present who is likely to oppose re-entry to the property
- If violence or the threat of violence is in any way likely, then you run the risk of committing an offence under section 6 of the Criminal Law Act 1977
- If you are satisfied that you can in fact enter ‘peaceably’, as the term suggests, you can physically enter the property and change the locks
- Changing the locks is a clear and unambiguous signal to your tenant that your have terminated the lease and have now effectively evicted your commercial tenant
- You will also need to leave a notice in a prominent location that is visible to your tenant- e.g. on the main entrance to the property
Terminating a commercial lease by court order
If you cannot exercise peaceable re-entry or would prefer to go the longer but safer route, you can apply to your local County Court for a possession order.
You can use the government’s online court and tribunal finder to find the County Court nearest to the property. After you have issued proceedings, the Court will set a hearing date, at which point your tenant has 14 days to file a defence against your claim or apply for relief from forfeiture. At the hearing, the court will decide whether possession should be granted, or perhaps adjourn the hearing to enable the parties to produce more information.
Issuing Court Proceedings
The act of commencing and serving possession proceedings on the lessee is sufficient evidence of the unequivocal election by the landlord to forfeit the lease. Upon the service of an issued claim form, notional physical re-entry occurs. The act of the landlord must be unequivocal and has the effect of forfeiting the tenancy, in the same way, a peaceable re-entry does.
Upon one of the above actions being exercised the lease is thereby forfeited and is brought to an end. Once the lease is forfeited the landlord is still entitled to seek relief in respect of the tenant’s breach such as a money claim for rent arrears. In other words, evicting commercial tenants from a premise does not relieve the tenant from having to pay back any rent arrears.
If you have to attend a court hearing you should gather all related documentation and proof of your claim. You’ll want to have the following items at a minimum:
- Lease agreements
- Bounced checks
- Records of payment of any kind
- Records of the communication between you and your tenant (phone and email records)
- A copy of the written notice that you provided your tenant
- Dated proof that the tenant received the notice (a signature from the tenant, or receipt from the post office)
Relief from forfeiture – tenants
Your tenant may be able to apply from relief from forfeiture. This will afford them the option to remedy any breaches of the lease, including repayment of all rent arrears and costs (including bailiffs and/or locksmiths fees, if you have exercised peaceable re-entry); at which point evicting commercial tenants from the premise no longer is an option.
Once a possession order is granted, your tenant will usually have 28 days to either apply for relief (by, for example, paying any rent arrears and your legal fees) or, if they are unable or unwilling to meet the relief conditions imposed by the court, vacate the premises. At this point, you will have full possession of the property. However, bear in mind that market conditions or the state of the property might make it difficult to re-let the property immediately.
As full business rates will usually become payable on an empty property after three months, you should ask yourself before evicting commercial tenants whether it is the wisest course of action to take. Some landlords decide to find a new tenant before they start eviction proceedings.
Further Tips for the eviction notice
- It should include a deadline (date) to “pay-rent or move out”.
- It should include the amount owed (including all fees)
- You are typically required to post this notice within X number of days before filing the eviction paperwork with your local court.
Protecting yourself in the future
Evictions can be costly and time-consuming, so hopefully you will never actually have to perform one. You can however protect yourself by gathering as much information as you can about potential tenants before they move in.
If you need legal advice on whether to evict a tenant, and how to go about that process, please do not hesitate to contact us.
Disclaimer – our articles are designed to give you guidance and information. There is no substitute for proper direct advice, particularly as everyone’s circumstances are different. If anything in this article may affect you, please contact us for advice that is specific to your circumstances.