In the current property market, landlords have to face the uncomfortable reality that they need to take steps in order to keep their good tenants who can no longer simply be viewed as a predictable cash cow, which can be left well alone. The steps that landlords need to take to retain such tenants are often obvious, but, equally as often, overlooked.
The most important step is good communication. The landlord should maintain regular contact with all tenants and endeavour to understand the issues that concern them - both those issues which directly relate to the property and also the wider issues, which affect their business. Done properly, if the tenant is facing difficulties, the landlord will find out in good time if there are steps that can be taken to assist the tenant.
Landlords of commercial properties are finding that the simple expedient of accepting rent on a monthly rather than quarterly basis can make a substantial difference to a troubled tenant. The imaginative landlord will doubtless be able to come up with other compromises to suit the particular circumstances of a tenant. The prudent landlord should be prepared to be both flexible and open-minded.
Good communication is also vital in the context of maintenance of the building. The vexed issue of service charges frequently tests the landlord and tenant relationship. The landlord should explain to the tenants what works he proposes to carry out, how the charges are arrived at and make early provision for major items of expenditure such as repairs to the roof. Commercial tenants do not have the same statutory protections as residential tenants in respect of service charges, but the goodwill of a good tenant can easily be lost if this aspect of the relationship is not dealt with in a sensitive and timely manner.
The landlord should ensure that those parts of the property for which he is responsible are properly maintained on a regular basis, and that he responds promptly to all requests relating to repairs and defects.
Good communication is also central to dealing with bad tenants. By maintaining contact with the tenant, the landlord is much more likely to be alert to potential problems before they occur and thus be in a better position to deal with them.
To qualify as “bad”, a tenant will ordinarily be in breach of one or more of the covenants in the lease, usually the covenant to pay rent. The obvious remedy for the landlord is to forfeit the lease either by a peaceful re-entry (so long as the lease relates to a wholly commercial property), or by court action. However, it is important to note that forfeiture brings a lease to an end and the tenant will no longer be liable for any further payments of rent following the forfeiture. It is quite a technical remedy and it is advisable for a landlord to seek early advice on the steps needed to be taken. In particular, it is common for the landlord to inadvertently waive the right to forfeit by affirming the lease by, for example, accepting rent after the right to forfeit has arisen. The landlord should also bear in mind that the court has a wide discretion to grant the tenant relief from forfeiture provided it remedies the breach and pays costs.
However, in the present climate it is probable that the landlord needs to keep even a bad tenant as the chances of reletting the property are slim. If that is the case, one alternative to forfeiture is to look to any guarantors under the lease. For example, by demanding that the guarantor pays the rent, the landlord can quickly bring the recalcitrant tenant to heel. Another remedy, which can tame the irresponsible tenant, is to get bailiffs to levy distress on the tenant’s goods at the property.
Current economic conditions are proving difficult for landlords as well as tenants. Landlords need to be far more constructive in dealing with their tenants. Good communication is central to the relationship and, for the landlord, it may well pay dividends long into the future when (we hope) the economy will have substantially improved.
About the author
Simon Wood is a barrister within the Commercial Litigation department of Hart Brown, based at their Guildford office. He was called to the Bar in 1987 and was a tenant in chambers in Middle Temple for ten years where he had a broad practice in general commercial and civil litigation before specialising in property litigation. Simon is an Accredited Mediator and a member of the Property Litigation Association.
Simon's list of favourites includes: Jane Austin’s Emma, pigs trotters and Ferris Buellers day off. He enjoys sailing, cycling and runs a smallholding with pigs/bees/chickens.
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