What can my landlord do if my business falls behind on rent?

What can a landlord actually do about unpaid rent?

Most commercial leases give the landlord several routes, and they are not all the same kind of step. Some are a conversation, others go through an enforcement agent or the courts. Knowing which is which helps you read a letter calmly and decide who you need to call.

This post covers commercial premises in England and Wales. Scotland has its own property law and its own terms, so if your premises are in Scotland, speak to a Scottish solicitor about your lease.

One route you may hear about is commercial rent arrears recovery, usually shortened to CRAR. Section 72 of the Tribunals, Courts and Enforcement Act 2007 says a landlord under a lease of commercial premises may use the procedure in Schedule 12, which is taking control of goods, to recover rent payable under the lease from the tenant. In plain terms, an enforcement agent can take control of goods to cover the rent owed, once the rules allow it. It applies only to commercial premises, and section 75 treats a lease as commercial only if no part of the premises is let or occupied as a dwelling.

When can CRAR be used, and for what?

The rules are narrow. Section 77 says CRAR can only recover rent that became due and payable before notice of enforcement was given, and that is certain or capable of being calculated with certainty. It also says CRAR is exercisable only if the net unpaid rent is at least a minimum amount, both when notice is given and when goods are first taken control of. Interest and VAT are left out when that net figure is worked out.

The Taking Control of Goods Regulations 2013 set that minimum as an amount equal to 7 days' rent.

What counts as rent matters too. Section 76 says rent for these purposes does not include any sum for rates, services, repairs, maintenance, insurance or other ancillary matters, whether or not the lease calls them rent. So a service charge debt is a different conversation from a rent debt, even when both arrive on the same invoice.

If you sublet part of the premises, the same regulations allow the landlord to serve a notice on your subtenant. It takes effect 14 clear days after it is served, and while the amount in the notice remains unpaid, the subtenant pays their rent to your landlord instead of to you. That can change your cash flow quickly, so it is worth knowing about before it happens.

What other steps might a landlord take?

CRAR is one option among several. The table sets out the broad routes and who to ask about each. It is a starting point for reading your own paperwork, not a prediction of what your landlord will do.

Step	What it involves	Who to ask
A letter or call asking for payment	An informal request, often with a statement of what is owed	You can reply yourself, ideally in writing
CRAR	An enforcement agent takes control of goods to recover rent, within the rules above	A solicitor, if notice of enforcement arrives
Notice to a subtenant	Your subtenant pays rent to the landlord until the notified amount is cleared	A solicitor, and your own cash flow plan
A claim for the debt	The landlord asks a court to order payment	A solicitor
Forfeiture of the lease	The landlord seeks to end the lease and take back the premises, where the lease allows it	A solicitor, promptly
Calling on a guarantee	Any guarantor, often a director, is asked to pay	Your own solicitor
A winding up petition	A creditor asks the court to wind up the company	A solicitor and a licensed insolvency practitioner

Forfeiture deserves a note of its own. The notice procedure in section 146 of the Law of Property Act 1925 covers other breaches of a lease, and the section says that, apart from its own provisions such as relief for subtenants, it does not affect the law on forfeiture or relief for unpaid rent. How forfeiture for unpaid rent works depends on the wording of your lease and on rules a solicitor will know. If you have any sign that the landlord is moving towards it, speak to one before you do anything else.

If a creditor has threatened to wind up the company, our post on what happens when a creditor threatens to wind up a company explains how that process runs. If you signed a guarantee when the lease was taken, our post on checking a personal guarantee sets out how to find and read it.

Why do directors get this wrong?

The first mistake is staying quiet. Rent arrears feel personal, because the landlord may be a person or a small business you know. Silence still reads as a lack of interest in fixing it, and it leaves the landlord deciding what to do without your side of the picture.

The second is relying on protections that have ended. During the pandemic, landlords were restricted from forfeiture and CRAR. The government's commercial rent code of practice records that the moratorium on forfeiture and restrictions on the use of CRAR in England and Wales ended on 24 March 2022. For debts outside its arbitration scheme, the code says landlords are able to exercise their ordinary enforcement rights in the ways they did before those restrictions.

The third is assuming every charge on the invoice is treated the same way. As section 76 shows, rent and service charges are not the same thing in law, and a solicitor may read your position differently once the two are separated.

The fourth is making a promise to the landlord that the cash flow cannot keep. A broken payment plan can leave the relationship worse than an honest delay.

How do you open the conversation with your landlord?

The code of practice was written for pandemic rent debts, but its Part One sets out behaviours for all business tenancies, and much of it still reads as sensible advice, though it is guidance, not law. It encourages landlords and tenants to negotiate, and it says tenants will need to show landlords sufficient evidence to substantiate their need for assistance with rent.

Before you call, put together a short, honest pack. Include what the company owes in rent, and separately what it owes in service charge and insurance. Add a cash flow forecast for the next few months that shows what the business can genuinely pay and when. Include a note of any other pressure, such as overdue tax or a lost contract, because the code's list of evidence to consider includes overdue invoices or tax demands, creditor demands and the loss of important contracts.

Then make an offer you can keep, even if it is small. If you reach an agreement, the code recommends that the parties confirm it between themselves, formally and in writing. It also says the relationship between landlord and tenant is defined by law and that parties may wish to seek legal advice when agreeing payment arrangements. Where talks stall, it suggests considering a mediator agreed by both sides, if the cost is proportionate.

When is this not the answer?

A good conversation with the landlord does not decide whether the company can carry on, and it is not legal advice. Vanquish Capital is not a solicitor, accountant or insolvency practitioner, and we will tell you when you need one.

If you receive a notice of enforcement, a court claim, or any sign that the landlord intends to forfeit the lease, speak to a solicitor promptly. If rent is one of several debts the company cannot pay as they fall due, speak to a licensed insolvency practitioner as well. The Insolvency Service's company health check guide says that if your company is in financial difficulty you should get advice from a qualified solicitor, accountant, authorised insolvency practitioner or financial adviser. It also notes that Business Debtline provides free advice on business debts.

And if the premises simply no longer fit the business, the right question may be about the lease itself, its break clauses and what an exit would cost, rather than about this quarter's rent. That is also a conversation for a solicitor, with your figures in hand.

Who can help you prepare?

Getting the figures straight, separating rent from other charges and preparing for the landlord takes time you may not have while running the business.

If it would help to have someone work through the numbers with you, build the cash flow forecast and plan the conversation with your landlord and your solicitor, you can book a confidential consultation. We can help you put the information in order. You can read more about our operational support and business recovery work.