Commercial property
Landlord and tenant
Can’t pay, won’t pay? Landlords must be sure leases are correctly drafted to enable action against tenants who are not paying their rent Jane Rees
In a challenging environment for landlords, it is vital they are aware of the options available to them should they face a non-paying tenant. When a lease is being drafted, it is important for landlords to discuss with their solicitor the covenants relating to non-paying tenants, which may ease the situation for the landlord should they need to take action in the future. For example, a landlord will want to ensure that the lease contains covenants enabling them to: ••forfeit the lease should the tenant breach the terms ••claim interest from the tenant with regard to any sums due ••claim costs from the tenant when enforcing breaches. Moreover, at the commencement, the landlord may want to consider a rent deposit deed (RDD). Although there are no set rules as to the value of deposits, the 5050 Journal July/August 2019
amount will often equate to between three and six months’ rent. It remains the tenant’s property, but the landlord takes a fixed legal charge over it to secure the deposit, giving them priority over other creditors. Creating a charge over a deposit was previously problematic because, where the tenant was a company, the charge needed to be registered at Companies House. However, that ceased to be the case from April 2013 when section 859A (6)(a) of the Companies Act 2006 came into force as part of the Companies Act 2006 (Amendment of Part 25) Regulations 2013, which provides that a charge in favour of a landlord on a cash deposit given as a security in connection with the lease does not need to be registered. While an RDD can provide reassurance for a landlord, many tenants will not be able to pay this amount