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Business Law Services – Commercial Law > Commercial Litigation & Dispute Resolution > Commercial Litigation: Useful Guides > A Guide To Recovering Rent Arrears

A Guide To Recovering Rent Arrears

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Commercial landlords continue to face challenges when dealing with rent arrears and enforcement options, particularly following the COVID‑19 pandemic and the legislative changes introduced during and after that period.

This guide summarises the key issues, enforcement routes, and practical considerations for landlords seeking to recover commercial rent or manage tenant default.

On this page:

Post‑Pandemic Restrictions & Current Position

During the COVID‑19 pandemic, the government introduced temporary measures preventing landlords from forfeiting commercial leases for non‑payment of rent. As your document states:

“Landlords cannot currently ‘forfeit’ the Lease for non-payment of rent… This measure will be in place until the 25th March 2022.”

These restrictions have now expired, meaning:

  • Landlords can forfeit commercial leases for non‑payment of rent (subject to lease terms and notice requirements).
  • The temporary restrictions on winding‑up petitions have also ended.
  • The government’s commercial rent arbitration scheme (introduced in 2022) applies only to protected rent debt accrued during mandated COVID‑19 business closures.

Rent arrears before March 2020 or after restrictions lifted can be pursued through normal enforcement routes.

Court Proceedings & Pre‑Action Requirements

Your document explains:

“Court action can be more costly, and take longer, than some other forms… You have to serve a letter before action demanding payment.”

Key points:

  • Claims against individuals or sole traders must follow the Pre‑Action Debt Protocol.
  • Claims against companies follow the Practice Direction – Pre‑Action Conduct.
  • A landlord must send a Letter Before Action before issuing proceedings.
  • Tenants have 14 or 28 days to respond depending on whether they file an acknowledgment of service.

Landlords should assess the tenant’s financial position before issuing proceedings, obtaining a judgment is pointless if the tenant cannot pay.

Rent Deposits

Your document notes:

“You can, if you follow the notice requirements, take the rent deposit… Check that the paperwork allows you to deduct what you are thinking you might deduct!”

Landlords should:

  • Review the deposit deed carefully.
  • Check for top‑up obligations and penalty clauses.
  • Consider whether to preserve the deposit for future liabilities (e.g., dilapidations).

Statutory Demands

Statutory demands remain a powerful tool, but must be used correctly:

“You can serve a statutory demand if the debtor owes at least £750 (company) or £5,000 (individual) AND the debt is crystalised and undisputed.”

Key considerations:

  • A disputed debt can lead to the demand being set aside with costs against the landlord.
  • Landlords must consider potential counterclaims.
  • Bankruptcy or liquidation may leave the landlord with little recovery, as they are usually unsecured creditors.

Previous Tenants & Guarantors

Your document explains:

“For leases pre‑dating 1 January 1996, you can go to the current tenant, first tenant, former tenants… For leases dated 1 January 1996 or after, you can go to the current tenant or anyone who assigned under an authorised guarantee agreement.”

Landlords may pursue:

  • Former tenants under old leases (pre‑1996).
  • Assignors under AGAs (post‑1996).
  • Guarantors of any relevant party.

Strict notice requirements apply, including serving a Section 17 notice within six months of the rent due date.

Interest on Late Rent

The Late Payment of Commercial Debts (Interest) Act 1998 may allow landlords to claim:

  • Statutory interest
  • Reasonable debt recovery costs

Your document notes:

“It is worth bearing in mind if you do not have proper interest clauses in your lease.”

Commercial Rent Arrears Recovery (CRAR)

CRAR allows landlords to instruct enforcement agents to recover rent or seize goods. As your document states:

“CRAR is a ‘self help’ remedy… It is only available to landlords of leases of commercial premises.”

Key points:

  • CRAR applies only to pure rent, not service charges or insurance.
  • Rent must be at least 7 days overdue (pandemic thresholds have now expired).
  • Notice must be served before enforcement.
  • CRAR cannot be used for mixed‑use or residential premises.

CRAR Against Sub‑Tenants

Landlords may require sub‑tenants to pay rent directly to them, but must ensure this does not conflict with forfeiture strategy.

Code of Practice for Commercial Property Relationships

Your document notes:

“The code of conduct is designed to support businesses to come together to negotiate affordable rental agreements.”

Although non‑binding, the code encourages:

  • Transparency
  • Collaboration
  • Reasonableness
  • Government‑supported negotiation

It remains a useful reference for dispute resolution.

Frequently Asked Questions (FAQs)

Can I now forfeit a commercial lease for non payment of rent?

Yes. The pandemic moratorium ended in March 2022. Forfeiture is possible if the lease contains a right of re‑entry and proper notice is served.

Can I still use CRAR?

Yes. CRAR is fully available again, subject to the usual rules (commercial premises only, rent only, minimum arrears).

Can I pursue rent arrears from before COVID 19?

Yes. Arrears accrued before March 2020 are not protected and can be pursued through normal enforcement routes.

What is the commercial rent arbitration scheme?

A statutory scheme for resolving protected rent debt accrued during mandatory business closures. It does not apply to rent outside those periods.

Should I issue court proceedings straight away?

Not always. Court action is costly and slow. You should assess the tenant’s financial position and consider negotiation first.

Can I use a statutory demand?

Yes, but only for undisputed debts. If the tenant disputes the amount or has a counterclaim, the demand may be set aside with costs.

Can I pursue former tenants or guarantors?

Yes, depending on the lease date and whether an AGA or direct covenant exists. Strict notice rules apply.

What if the tenant has no assets?

Enforcement may be pointless. Always check financial standing before issuing proceedings.

Can I use the rent deposit?

Yes, if the deposit deed allows it. Ensure notice requirements are followed and consider future liabilities before drawing down.

Is negotiation still encouraged?

Yes. The government’s code of practice emphasises collaboration and reasonable behaviour, and courts expect parties to attempt resolution before litigation.