Quarter Day Rents, Commercial Property
"As the usual quarterly rent payment date approaches (25 March), landlords will be getting nervous, unsure whether their tenants are going to be able to pay.
"But it may be former tenants who should be most worried if they have assigned the lease to someone else.
"If a current tenant cannot pay their rent then a previous tenant who has passed on the lease to another party may be liable. It is important for businesses to be aware of their situation regarding letting someone else take over a lease, otherwise businesses that believe a lease is no longer their problem could find it comes back to haunt them.
"The nightmare scenario occurs where a lease still has a few years left to run, with no prospect of the current tenant, who may be insolvent, paying the rent again. The right to claim back any outlay from the current tenant is of little use if they are insolvent.
"There are ways out of this situation though. As if you are required to pay the rent, you are entitled to ask for an overriding lease. This enables you to take back some control over the premises, hopefully evicting the current defaulting tenant and find a new occupier who can cover the rent for the rest of the lease.
"As the economy comes out of recession and businesses see their trading figures improve, we encourage them to always factor into their financial planning the possibility of having to pay rent on premises that they thought that they’d disposed of."
Danny Revitt is a Partner in the Commercial Property team at Irwin Mitchell who represents both retail tenants and landlords.