Commercial Forfeiture

[problemchild]

Hi

I own a commercial premises (shop and flat above) which I recently rented to a business under a standard 15 year FRI commercial law society lease.

I rented to him at a grossly undervalued rent (due to commercial agent’s incorrect valuation) and therefore as the tenant did not pay rent I decided to forfeit with a view to renting the premises to another person at a £6k.higher rent. (Please note that the tenant spent a lot of money on the business and improving the property whilst he was refusing to pay me).

Under the forfeiture clause (if rent is outstanding for 21 days) I instructed my solicitor to forfeit. He delayed this and eventually transferred the matter to another partner in another office. This partner delayed the issue further and I repeatedly asked for him to forfeit. He took my instruction but didn’t act.

After 3 months of arrears (and two months after my instructions to forfeit) the solicitor still hadn’t forfeited. The tenant finally paid up but this meant I could not re-let the property to another person at a higher rent.

I have therefore lost the chance to increase the rent due to the solicitor’s stupidity.


1. Could anyone advise me as how difficult it is to forfeit a standard commercial tenancy by instructing a bailiff and what process should he have carried out?

2. What recourse do I have against my solicitor?


Thanks a lot and apologies for being long-winded.

[Editor]

There are proposals on the table to amend the law regarding forfeiture as a remedy - www.lawcom.gov.uk/docs/cp174.pdf - this remedy largley being seen as Draconian and unfair to tenants?
We don't know the full circumstances, but perhaps in view of this and the complications which can arise from peaceable re-entry and forfeiture, your solicitor was reluctant to instruct bailiffs to proceed.
Perhaps you should have insisted or instructed bailiffs yourself.
If you went for the re-entry route (as opposed to application through the courts) you effectively (and currently legally) re-gain possession. However, the tenant can then apply for relief, which means he may re-gain possession on fulifilling his obligations - re-paying rent owed as he has now done. If you re-enter you cannot re-let immeditely in case the tenant applies for relief and therefore you are in limbo!
The outcome may have been the same as you have arrived at now, except it would have cost you a lot more.
Presumably you have a reasonable rent review clause (ie 3 or 5 years?) which would perhaps be a better way to achieve a market rent. If the tenant cannot afford a market rent then perhaps you can eventually get possession.

[problemchild]

Thank you editor.

After threatening to withdraw my instructions, i fianlly got a call form my solicitor today.

Apparently, as the premises also has residential accommodation, only the business part can be forfeited through a bailiff. Therefore, according to my solicitor I can close down the business part but will have to apply to court for removing the tenant from the residential part.

I thought this only applied to tenancies less than 3 years, or is my solicitor right?

Thanks.

[Editor]

You do realise that if your tenant occupies part of the premises (e.g. flat above shop) then the Protection from Eviction Act 1977 applies as the let is classed as "let as a dwelling" and prevents landlords from using peaceable re-entry - you must use the court process.
See recent test case appeal: Pirabakaran v Patel (2006) EACA Civ 685; 36 EG 260 p260
As far as I'm aware the length of tenancy/lease has no bearing on this.

[yeahbutno]

In my experience - tenants rarely default one and never again. Chances are your tenant will fall into arrears again at some point in the future, and I think you will be well served to know EXACTLY where you stand, so you can take the appropriate action immediately.

Please bear in mind the Ed's comments though; you could easily spend a lot of money getting him out, only for him to be able to legally get back in again.

What does the lease say about rent reviews? And how do you know the market rent is £6k higher?