Evicting a commercial tenant | What you need to know
As a leading insurance broker specialising in property insurance, we understand the complexities and challenges landlords face with commercial properties. While our expertise does not extend to providing legal advice on commercial evictions, we recognise the importance of safeguarding your investment against potential risks, including the unfortunate scenario of needing to evict a tenant and reclaim your property.
There are numerous reasons a landlord might find themselves in this position, often related to breaches of the lease terms, such as non-payment of rent, unauthorised subletting, or failure to maintain the property adequately.
Our guide aims to highlight the significance of having comprehensive property insurance in place as a landlord. Such insurance can offer a layer of financial protection during the eviction process, although it’s crucial to consult with a legal professional for guidance on the legal implications and the rights of the tenant in these situations.
- What constitutes a commercial property?
- Reasons to evict a commercial tenant
- How can I claim back possession of my commercial property?
- What rights does a commercial UK tenant have?
- Can I evict a commercial tenant at the end of their lease?
- How long does it take to evict a commercial tenant?
- How much does it cost to evict a commercial tenant?
- Can I evict a commercial tenant without a lease?
What constitutes a commercial property?
To start with, it’s useful to identify what is meant by a ‘commercial property’, and therefore what types of property would be covered by a commercial lease.
A commercial property is defined as any property that is not used as a domestic dwelling.
The Planning Portal specifies a list of use classes for commercial properties in England and Wales but, broadly speaking, they fall into five categories.
- Industrial, such as factories and warehouses
- Offices
- Leisure, such as hotels, restaurants, pubs, sporting facilities
- Retail shops, shopping centres and hair and beauty salons
- Healthcare settings, nursing, and residential care homes
Reasons to evict a commercial tenant
There are three main reasons you may want to take back possession of your commercial property, and here we’ll delve a little deeper into each one.
Commercial eviction for non-payment of rent
Under the Commercial Rent Arrears Recovery (CRAR) process, commercial landlords have the ability to recover unpaid rent without applying to the courts. Landlords can instruct a certified enforcement agent to enter the premises and recover the tenant’s good to sell them to cover the unpaid rent. Notice must be served to the tenant seven days prior to taking action.
There are also certain conditions that must be satisfied under CRAR; the property use must be solely commercial, there must be a written tenancy agreement in force, the rent must be at least seven days overdue, and CRAR can only be used to collect ‘pure rent’ and not service charges, insurance rent, or any other charges the tenant is responsible for under the lease.
Commercial eviction for breach of the terms of the lease
Breaches of the commercial lease can include subletting without permission, illegal or unauthorised use of the property, making unauthorised alterations, or anything else expressly forbidden under the terms agreed.
In the event of a breach, you must serve a Section 146 notice before you can claim possession of the property.
This notice, served by a commercial property solicitor to all interested parties, must outline the nature of the breach and the requirement for any remedial action or compensation.
Commercial eviction for breach of the repair condition
The property must be in a state of disrepair – described as a deterioration of its physical condition – for the tenant to be in breach of the repair condition.
As a landlord seeking eviction, you must serve a Section 146 notice setting out the breach and provide the tenant with a reasonable time to remedy the issue.
Once this period has elapsed, you are entitled to peaceably re-enter the premises or commence court proceedings to evict the tenant.
What is a Jervis and Harris clause?
A Jervis v Harris clause in a lease agreement allows a landlord to serve notice on a tenant to require them to carry out repairs.
Where the tenant fails to do so, the landlord can enter the premises, carry out the repairs, and reclaim the costs from the tenant.
How can I claim back possession of my commercial property?
If you want to evict a commercial tenant, you will need to claim back possession of your premises, a process known as ‘forfeiture’.
But you must have full legal grounds to forfeit the lease of your premises, not only as a result of a breach of the agreement, but also by having the relevant clauses in the lease in the first place. If you don’t include the correct clauses in the lease your powers as a landlord are significantly reduced.
You must follow the correct legal process for evicting your tenants, failure to do so could leave you in breach of your commercial property insurance.
The right to forfeit a commercial lease
A ‘forfeiture of lease’ clause must be included in the commercial lease agreement for a landlord to be able to ‘peaceably re-enter’ a property if there has been a breach of the lease.
How can I lose the right to forfeit the lease?
It is possible for a landlord to inadvertently lose the right to forfeit by taking steps that recognise the continued existence of the lease.
For example, this could involve the landlord, or their agent, continuing to demand rent, or accepting payments of rent even after the tenant has breached the terms of the lease.
Regaining possession by peaceable re-entry
Once a qualifying event has taken place to allow you to forfeit the lease, and assuming your lease agreement has a forfeiture and re-entry clause, you can instruct a certified bailiff to enter the premises without recourse to the courts.
This can include breaking the locks to gain entry and changing them to bar the tenant from gaining access. While bailiffs can break the locks, they are not permitted to use any physical force against any person on the premises to gain access; peaceable re-entry can only be used on a vacated property.
Changing the locks is an unambiguous signal to your tenant that you have terminated the lease and have now effectively evicted your commercial tenant.
It’s worth noting that a tenant may well apply to a court for relief from forfeiture to have the lease reinstated. However, for this to be granted they would need to pay all outstanding rent and the landlord’s costs associated with the forfeiture, and a court is unlikely to award relief if the landlord has already granted a lease to a new tenant.
Applying for an eviction court order
The other route to regaining possession of your property is to apply to the county court for a possession order. This process is often regarded as a legally safer route to take but can take much longer to complete.
Once your solicitor has issued proceedings, your local county court will set a date for a hearing, at which point the tenant has 14 days to either file a defence to your claim or apply for relief from forfeiture.
At the hearing, the court will rule on whether possession can be granted or adjourn for more information to be gathered.
What is a Section 146 notice?
As we have discussed, notwithstanding Covid-19 regulations, you do not need to serve court papers to gain re-entry to your property if the tenant has not paid their rent.
However, for other breaches of a commercial lease – such as the repair condition or unauthorised use of the premises – you will generally need to serve a notice under Section 146 of the Law of Property Act 1925 before you can take action to reclaim your property.
A Section 146 notice provides for forfeiture of the lease if a breach of its terms are not remedied by the tenant within a certain time period.
How do I serve a Section 146 notice?
When serving a Section 146 notice, you must specify how the lease has been breached, if the breach is capable of remedy by the tenant and how, and a timeframe for them to comply.
You must serve the notice to your tenant, and it’s important to have proof of delivery, perhaps by having an independent witness present for verification.
Recommended methods of serving a Section 146 notice.
- Personal delivery: hand the notice to your tenant at the property, with a witness present.
- Hand posted: post a named and addressed envelope at the property, again in the presence of a witness.
- Recorded delivery: if the tenant accepts the delivery, you have proof that notice has been served. If they do not, notice has not been served.
- Process server: a professional service that serves legal notices and will provide evidence for the court.
What information will I need to present to the court?
When attending a court hearing, it’s advisable to come armed with as much information about your lease and the terms that have been broken as possible.
At a minimum, this should include:
- a copy of the lease agreement;
- records of rental payments made and missed;
- records of communication between you and tenant, including emails, text messages, and contemporaneous notes of phone calls;
- a copy of the notice provided to your tenant;
- proof that the tenant received the notice.
What rights does a commercial UK tenant have?
Commercial tenants in the UK have a right to apply for relief from forfeiture.
This provides them with the option to remedy any breaches of the lease, including payment of any rent arrears, making any repairs to the property, costs taken to recover them, and costs incurred by a landlord in changing the locks etc.
Once a possession order is granted by court, tenants usually have 28 days to apply for relief – by paying rent arrears or remedying other breaches – or vacate the premises.
Can I evict a commercial tenant at the end of their lease?
The Landlord and Tenant Act 1954 (LTA) gives tenants of commercial properties rights of occupancy known as security of tenure.
It means that tenants have the right to renew the lease and stay in the property after the end of the lease term, as long as they continue to pay rent and have not breached any terms of their tenancy agreement.
However, the landlord can exclude this provision of the LTA, as long as it is done in agreement with the tenant and the correct process is followed. The tenant will then be required to give up possession of the premises when the tenancy expires unless a new lease is granted by the landlord.
See our guide to commercial landlord rules and regulations for more detail.
How long does it take to evict a commercial tenant?
The length of time it takes to evict a commercial tenant depends on the exact circumstances of any breach of the lease, and the route you want to take – peaceable re-entry or court order.
Peaceable re-entry can be a very quick process, typically a couple of days, but bear in mind the tenant can still apply for relief from forfeiture.
If you go down the court order route it can take much longer, sometimes up to several months.
How much does it cost to evict a commercial tenant?
Commercial solicitors may charge somewhere between £500 and £800 for straightforward commercial eviction proceedings, but the costs can quickly rise in the event of disputes or protracted court proceedings.
Recovering unpaid or other costs – such as repair costs – can also be a time-consuming and expensive process, so it’s vital to have legal expenses insurance, usually an optional extra to your commercial property insurance cover.
Commercial legal expenses insurance provides cover to defend your legal rights in a dispute with your tenant over maintenance of your property, repossessing your property, and recovering outstanding rent due to you.
For a legal expenses claim to be successful, it is imperative that you inform your insurer before any action is taken, and follow the advice of the insurer’s legal helplines. Insurers will also often appoint their own panel solicitors to act on the client’s behalf.
It is important to note, though, that not all commercial legal expenses policies will cover the cost of recovering outstanding rent. Before taking out a policy it is best to check the policy wording to confirm if this is covered.
Can I evict a commercial tenant without a lease?
It is more difficult to enforce your rights as a landlord if there is no written lease in place, although you may still have grounds to evict a commercial tenant if there is a verbal agreement in place.
The problem with a verbal agreement is that it is your word against the tenant’s, with little evidence.
You can still take similar legal steps as outlined above, but it may well be more time-consuming and complicated, and it may be worth engaging the services of a specialist commercial solicitor to take on the case.
Please note that if you have legal expenses insurance, it is a requirement to have a written tenancy agreement in place. Failure to do so risks invalidating your insurance and your insurer may decline a claim.
FAQs
Can I evict a commercial tenant if they are in breach of the terms of their lease?
Yes, you can either take peaceable re-entry possession of your property or serve a Section 146 notice and go through the courts to gain possession.
Can a commercial landlord change locks?
Yes, a commercial landlord can change the locks on their property either by peaceable re-entry, or as soon as forfeiture of the lease has been agreed by a court.
Can bankruptcy stop commercial eviction?
Landlords cannot forfeit the lease if their tenant has entered administration or is the subject of compulsory liquidation.
If this happens, the landlord must apply for permission from the court, administrator, or liquidator, who should agree to the forfeiture if the administrator is not occupying the premises and the business is no longer trading.
However, if you do forfeit the lease, you lose the right to claim for unpaid rent, and it may not be wise if the administrators have moved in and are trying to sell the business as a going concern. If they were successful, you would be entitled to rent and a new owner may be keen to continue with the lease.
Also bear in mind that an empty property is subject to business rates after three months, and you will also need to arrange unoccupied commercial property insurance.
Can a landlord evict during a periodic commercial tenancy?
A periodic tenancy is where the fixed term specified in the lease has ended, and the tenancy rolls over on the same terms from period to period (a period being the length of time between rent payments).
During this period, both the landlord and tenant have the same rights and obligations as they did under the old lease.
If both parties have opted out of the security of tenure specified in the LTA, the landlord will be able to take possession by giving a certain amount of notice as specified in the expired lease.
If, however, the tenant does have security of tenure, the landlord can only obtain possession by applying to court for a Section 25 notice.
The grounds for refusing a lease renewal, found under Section 30(1) of the Act, are:
- the tenant’s failure to keep the premises in a good state of repair;
- persistent late payment of rent;
- other substantial breaches of the tenancy agreement;
- provision of alternative premises on reasonable terms;
- demolition, reconstruction, or sale of the property;
- the landlord can prove that they intend to occupy the premises for their own business.
What happens if the tenant breaks back into the property?
The tenant should be given the chance to access the property, under supervision, to collect their possessions, but it is a criminal and civil offence for them to break into the property once the lease has been forfeited by the landlord.
Alan Boswell Group has a wealth of advice and specialist insurance offers for commercial landlords. Check out our commercial landlord hub for articles and details of cover.
Legislation and guidance included in this article is correct as of January 2023. Please note that legislation does change, it is always best to check the most up to date guidance on gov.uk, and seek legal advice before taking action.
