Commercial rent arrears: what landlords should do next

Commercial rent arrears can place immediate pressure on landlords, particularly where mortgage commitments, service charge shortfalls, or wider portfolio performance are affected. Prompt action can improve recovery prospects, preserve leverage, and reduce the risk of a more expensive dispute later.

Landlords often have several legal and commercial options available, but the right route depends on the lease terms, the level of arrears, the tenant’s financial position, and the value of the premises. Decisive early advice can make a significant difference to the outcome.

Our solicitors advise landlords, investors, and managing agents on rent recovery strategy, lease enforcement, and wider property disputes. We work closely with litigation specialists where court action is required.

What counts as commercial rent arrears?

Rent arrears are not always limited to basic rent. Depending on the lease, sums owed may include:

• Principal rent.
• Service charge.
• Insurance rent.
• Interest on late payments.
• VAT where applicable.
• Other sums reserved as rent under the lease.

The lease wording is important, as some remedies may depend on whether the unpaid sum falls within the lease definition of rent.

First steps landlords should take

Before taking action, landlords should gather the key information and avoid steps that may weaken their position.

This usually includes:

• Reviewing the lease terms.
• Confirming the arrears position.
• Checking any rent deposit arrangements.
• Identifying guarantors or former tenants.
• Considering whether previous conduct may affect enforcement rights.
• Assessing whether the tenant is still trading.

A clear strategy at the outset often saves time and cost later.

How can landlords recover commercial rent arrears?

Landlords often have several remedies available to recover unpaid rent, either as standalone options or as part of a wider enforcement strategy. The most effective route will depend on the lease terms, the arrears position, and the wider commercial objectives.

1. Negotiation and payment plans

Some arrears matters can be resolved commercially through structured repayment proposals, revised payment dates, or short-term concessions. Where a viable tenant is experiencing temporary difficulty, this may protect income better than immediate enforcement.

Any agreement should be documented carefully.

2. Using a rent deposit

Where a rent deposit deed is in place, landlords may be able to draw against the deposit, subject to the terms of the deed. This can provide a quicker short-term recovery route.

Landlords should also consider whether the tenant must top up the deposit.

3. Pursuing a guarantor

If the lease benefits from a guarantor, recovery action may be available against them depending on the lease terms and guarantee wording. This can be particularly relevant where the tenant company has limited assets.

4. Commercial Rent Arrears Recovery (CRAR)

CRAR, introduced by the Tribunals, Courts and Enforcement Act 2007, may allow enforcement agents to take control of a tenant’s goods in qualifying cases.

Strict rules apply, including notice requirements and limits on what sums can be recovered. It is not suitable in every case.

5. Forfeiture of the lease

Where the lease permits it, landlords may have the right to forfeit for rent arrears and recover possession, subject to the lease terms and the relevant legal requirements.

Forfeiture can be effective, but landlords should take care over waiver issues and procedure. Accepting rent or acting inconsistently after a breach may affect rights in some circumstances.

You can read more in our article on commercial lease forfeiture.

6. Court proceedings for debt recovery

A landlord may choose to pursue the arrears through the courts, particularly where retaining the tenant is commercially preferable to terminating the lease.

Judgment debt options may then follow.

How quickly should landlords act?

Delay can reduce leverage. Arrears often increase over time, and a struggling tenant’s position may worsen.

Swift advice can help landlords:

• Protect enforcement options.
• Avoid waiver arguments.
• Preserve evidence.
• Improve recovery prospects.
• Plan around refinancing or re-letting decisions.

Early action does not always mean aggressive action, but it usually means better options.

Common mistakes landlords make

Commercial rent arrears issues are often mishandled through avoidable errors such as:

• Waiting too long to review options.
• Relying on informal promises to pay.
• Failing to check the lease wording.
• Accepting payments without considering legal consequences.
• Overlooking guarantors or deposits.
• Choosing the wrong remedy for the wider commercial objective.

A tactical approach is usually more effective than a reactive one. 

Should landlords prioritise recovery or possession?

That depends on the circumstances.

If the tenant remains viable and the premises are difficult to re-let, preserving the tenancy while recovering arrears may be sensible.

If the tenant is no longer viable, persistently defaulting, or harming the asset, possession-focused options may be stronger.

The best route is often the one that supports the value of the property as well as the arrears claim.

FAQs about commercial rent arrears

Landlords often need quick answers when rent remains unpaid. Below are some of the questions we are regularly asked.

1. Can I change the locks for unpaid commercial rent?

   Possibly, where the lease allows forfeiture for rent arrears and the right has arisen. However, peaceable re-entry must be handled carefully and lawfully. Taking the wrong step can expose a landlord to claims, so legal advice should be taken before acting.

2. Can I use CRAR for service charge arrears?

   CRAR is generally aimed at recovering qualifying rent rather than every sum owed under a lease. Service charge and other additional sums may not be recoverable in the same way. The lease wording and statutory rules will need to be reviewed.

3. Can I chase a guarantor straight away?

   Potentially, yes. Much depends on the guarantee wording, the lease terms, and whether any procedural steps need to be taken first. In some cases, pursuing a guarantor can be more effective than immediate action against the tenant.

4. What if the tenant says they will pay next month?

   Promises to pay should be treated cautiously. Landlords should consider the tenant’s payment history, current financial position, and whether waiting could weaken enforcement options. If time is given, any agreement should be recorded clearly.

5. Can I recover legal costs?

   Sometimes. Many commercial leases contain clauses allowing landlords to recover certain enforcement costs, but this depends on the lease wording and the action taken. Costs recovery can also depend on whether court proceedings are issued.

Guidance from our solicitors

Commercial rent arrears issues often involve more than recovering unpaid sums. The right strategy can protect income, preserve leverage, and support the long-term value of the asset.

Bhavini Kalaria, litigation solicitor, says:

“Rent arrears should be approached strategically rather than emotionally. The strongest outcome often comes from choosing the remedy that best protects the landlord’s long-term position, not simply the first option available. Early advice can make that decision far clearer.”

Whether you own a single unit or manage a wider portfolio, we can help you assess your options and act decisively. Get in touch to speak with our solicitors.