In an ideal world, when signing a new lease for a commercial property you would hope that everything goes smoothly through to when the lease expires and it’s time for renewing. Unfortunately for some, this is not always the case.
If you are a tenant, business can be quiet which could result in a missed payment, or if you are a landlord, you could find your tenant has changed part of the premises and breached the lease contract.
In both cases repossession could be the result. However, as simple as it is to say what the outcome could be, the process of repossession is far from straightforward.
Here, Emyr Pierce details the process and issues of commercial property repossession.
What is repossession?
In short, repossession is the end of a tenancy before the term of lease expires. This could happen from the reasons mentioned above.
There are two ways a property can be repossessed. The first option is to forfeit the lease, which can be done under common law and is known as ‘peaceful repossession’. This means no court proceedings, whilst the second option would mean going to court to obtain an Order of Possession.
In most commercial property contracts there will be a clause that states a landlord can re-enter the property and take possession if the contract is breached. If this is the case and the landlord wants to take the ‘peaceful’ route then notice must be given to make the public and tenant aware that the property is being repossessed.
Peaceful repossessions usually take place outside of work hours to ensure no one is in the property. This usually involves changing the locks and doing an inventory check
If done properly, a peaceful repossession is an efficient way of dealing with tenants and there will be no court costs to pay.
Order of Possession
If in the case where the tenant is a difficult, a landlord can go to county court to gain an Order of Possession. This can also be the safest route as it follows proper court proceedings.
A landlord who wishes to instigate repossession can serve a Section 146 notice. The notice must specify the breach of contract, whether or not it can be remedied, and state any compensation requirements.
Once the notice has been issued, the landlord must give a window of opportunity to remedy the breach, if it is remediable. If the leaseholder fails to do so then court proceedings will follow.
Though there are different options for landlords, it is important to note the tenant’s rights as well. If an Order for Possession is filed, the tenant has the right to file for relief and in some cases, these can be granted if the tenant has paid the backdated rent or remedied the situation.
Another point to note, whether you are a tenant or a landlord, is if breach of contract was noticed but the tenant continued paying as normal, the landlord’s right may then be waived and the case will be in the tenants favour.
Repossession can be a complicated matter that involves many factors, which is why it is important to look for independent legal advice from a commercial property specialist to make clear of the situation.