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Breach of Commercial Covenant - Your Options as a Landlord

View profile for Alexander Clarke
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Covenants are another way of describing the obligations that exist between landlords and tenants, as set out in the commercial lease. They are unfortunately a common source of dispute.

Landlord covenants will typically be along the lines of ensuring that the structure of the building that the tenants occupy remains safe and sound, and to carry out any necessary repairs to make sure this is the case. Where the premises form part of a building or estate, the landlord may covenant to provide certain services in exchange for a service charge. These services may be repair, maintenance, provision of lighting and heating and provision of communal facilities, for example kitchens and bathrooms.

Another common covenant for landlords is to allow peaceful enjoyment of the premises.

Tenant covenants are usually a lot more far reaching than landlord covenants. They might include for example paying rent and other charges; to insure the premises; not to assign or sublet; to use the premises only for particular activities; not to alter the premises; to repair where reasonable and to allow the landlord to access the premises in order to inspect them or carry out repairs.

What to do if commercial tenants have breached their lease

Should a tenant breach one or more of its covenants, the first thing to ascertain is whether or not the breach is remediable. In other words, would you like to force compliance with the terms of the lease and continue your landlord and tenant relationship, or has the situation gone so far that there is no alternative but to forfeit the lease?

The nature and extent of the breach will have a bearing on the decided action to be taken, but you will need to carefully consider your objectives before you settle on what to do next.

In some cases, landlords are keen to maintain good relations with their tenants. For example, the tenant may pay their rent and other charges on time, but have breached a covenant by making alterations to the premises without permission. This could well have been a misunderstanding. Your objective may be to have the premises returned to its previous state, or something reasonable in between, so your course of action may be negotiating and reaching an agreement with the tenant as to who will manage and cover the cost of the necessary remedial work.

On the other hand, your tenant may have prevented you gaining access to the premises, which has led to you being unable to carry out urgent repairs, resulting in the devaluation of your property, not to mention health and safety issues. There may be no alternative but to end your relationship with the tenant and regain possession. You may even wish to claim damages, which is usually possible if you can provide evidence of your losses.

Before forfeiting a lease…

You will need to check the terms of the lease before going ahead and terminating it. It will usually set out contractual remedies for certain breaches, which will need to be followed. Only some breaches will allow you to forfeit the lease legally, so proceed with caution and always take specialist advice from solicitors for claiming lease dispute issues before you make any decisions.

Think carefully about the implications of ending the tenancy. Do you have another tenant lined up? How long can you survive without a replacement tenant and their income, covering all the costs and rates yourself?

You will also need to check whether the tenant is solvent. If they are not, this will affect the forfeiture action you can take. In addition, you will need to consider any subtenants and how ending the lease will affect them.

Be aware that you will need to give the tenant adequate notice before going ahead with forfeiture action. This must be done via a Section 146 Notice.

There are various other important considerations and these will vary according to your particular situation. Taking specialist legal advice from solicitors specialising in commercial rent recovery and breach of covenant is absolutely vital.

Alternatives to forfeiture

Even if commercial tenants breached terms of the lease agreement, you may wish to avoid bringing the tenancy to an end. Alternatives may include negotiating a remedy with the tenant, for example agreeing that you will arrange repairs and that the tenant will cover the cost.

You may also be able to claim damages to get you back in the position you would have been in should the tenant have complied with its obligations, or arrange for an order to force the tenant to comply with the breached covenant(s).

Tailored advice on breach of covenant disputes

If you are seeking expert advice on how to deal with a commercial lease dispute, look no further than the specialists at Seth Lovis & Co.

Our team of respected experts offers in-depth knowledge and extensive experience in all aspects of landlord and tenant disputes including breach of covenant cases. Why not talk to us today? Our advice is strategic, fully tailored and known to get results. Simply call 0207 282 4289 or email and we’ll put you straight through to a member of our dedicated landlord and tenant team.