Shop Lease

[monabri]

We own a small shop which we leased out in March 2015. All rents were received until recently (Covid 19). We have tried to make contact with the shop tenants but they are incommunicado!

After a search on Companies House, we noticed that the company named on the lease dissolved in July 2015 but failed to mention that little detail to us. Both the husband and wife are named as guarantors although it is only the wife who actually runs the shop. They currently owe us approx £2k and we have been informed (from someone who works in the shop part time) that they personally have financial difficulties so hope of recovery of the rent/electric bills is small. The part time worker says that the couple are now living in a friend's caravan somewhere in (name withheld).

It seems to me that the tenants have been trading at out shop for the last 5 years without any lease in place (I wonder how they file their accounts?).

Can we simply change the locks on the shop such that they cannot gain entry and then start to remarket it looking for new tenants?

[Grumpsimus]

I couldn't advise you just change the locks and try to remarket the premises. This could only be the last resort, if it proves impossible to trace the tenants after real efforts to do so.

The fact that the premises have been occupied and you have been accepting rent for the past five years means that they have a business tenancy under the Landlord and Tenant Act. This needs to be terminated by serving notice in the perscribed form, on the grounds of non payment of rent.

Incidentally, you do not need a lease to either occupy premises or to file accounts.

I would suggest that you consult a Surveyor/Solicitor who deals with commercial property who will be able to advise on the correct procedure based on the detailed facts.

[Mike4]

I couldn't advise you just change the locks and try to remarket the premises. This could only be the last resort, if it proves impossible to trace the tenants after real efforts to do so.

But, but.... the tenant, a Ltd Co, HAS been traced and was dissolved in 2015. I see no harm at all* in taking possession, changing the locks and re-letting.

The tenant is possibly entitled to take action for unlawful possession but they no longer exist, so the OP's defence against any action taken by the current occupiers would be they have no personal right to occupy. It is not their name on the tenancy.

But IANAL.

*Its a really provocative course of action to take so soon, which could perhaps backfire in other ways that legal action. E.g. Facebook campaign condemning the LL, or even retaliation in the form of vandalism targeting the shop or the LL's home address.

(Edit to clarify a couple of points.)

[swill453]

So are they (the people, not the ltd co) trading from the premises right now? If so, it would seem just as easy to visit and have a discussion and/or ask for the rent, as it would to go and change the locks.

Scott.

[PinkDalek]

[But, but.... the tenant, a Ltd Co, HAS been traced and was dissolved in 2015. I see no harm at all* in taking possession, changing the locks and re-letting.

The tenant is possibly entitled to take action for unlawful possession but they no longer exist, so the OP's defence against any action taken by the current occupiers would be they have no personal right to occupy. It is not their name on the tenancy.

But IANAL. ...

It would appear the OP has been receiving and accepting rent from someone for 5 years or so. That someone may not be the dissolved limited company but that may not now be relevant (as observed by Grumpsimus). In a recent similar situation, we were advised by our solicitors to tread extremely carefully in that the person paying the rent had effectively been permitted to step into the shoes of the limited company.

I don't know the precise legal position in our case, as we took a formal route to regain possession and the other party's solicitors were not up to speed on anything much at all.

[PinkDalek]

[Can we simply change the locks on the shop such that they cannot gain entry and then start to remarket it looking for new tenants?

Not mentioned yet but are you aware of http://www.legislation.gov.uk/ukpga/2020/7/section/82/enacted?

82 Business tenancies in England and Wales: protection from forfeiture etc

(1) A right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent may not be enforced, by action or otherwise, during the relevant period.

(2) During the relevant period, no conduct by or on behalf of a landlord, other than giving an express waiver in writing, is to be regarded as waiving a right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent. ...

The relevant period has been extended to 30 September 2020.

Tread very carefully.

[Mike4]

So are they (the people, not the ltd co) trading from the premises right now? If so, it would seem just as easy to visit and have a discussion and/or ask for the rent, as it would to go and change the locks.

Scott.

I would agree but got the impression from the OP it is employees staffing the shop, although they don't actually say so - only that the tenants are holding themselves incommunicado.

Another avenue to explore would be to sue the guarantors for the missing rent. Assuming they are the people who stepped into the shoes of the defunct tenant it will either smoke them out of their state of non-communication and get you some proper contact details, or get you a CCJ which you can set about enforcing.

I would advise caution though. If you end up evicting them I'm not sure you'll find new tenants at the same rent as quickly and easily in today's economic climate as you seem to think. You could easily end up with a void of six month or a year I would guess, making the missing £2k pale into insignificance.

[dealtn]

I would advise caution though. If you end up evicting them I'm not sure you'll find new tenants at the same rent as quickly and easily in today's economic climate as you seem to think. You could easily end up with a void of six month or a year I would guess, making the missing £2k pale into insignificance.

Isn't it the case that rent is not currently being paid, hence the outstanding debt? In effect there is already a void. A new tenant paying 50-80% of the previous rent, say, would be an improvement, even with a 6-12 month void maybe.

[Mike4]

I would advise caution though. If you end up evicting them I'm not sure you'll find new tenants at the same rent as quickly and easily in today's economic climate as you seem to think. You could easily end up with a void of six month or a year I would guess, making the missing £2k pale into insignificance.

Isn't it the case that rent is not currently being paid, hence the outstanding debt? In effect there is already a void. A new tenant paying 50-80% of the previous rent, say, would be an improvement, even with a 6-12 month void maybe.

Well the OP doesn't actually say that, it is vague and ambiguous in so many ways. All it says it £2k remains unpaid. Given that even small shop rents are typically in the order of £20k that doesn't really make sense. On the last quarter day at the end of June I'd have expected £5k(ish) at least to have been paid, unless the annual rent really is £8k. If it IS £8k annual rent, the holding over of eviction proceedings for COVID is probably the reason for the £2k not being paid. Maybe the OP was not aware of this and could clarify.

Edit to add: Oh and another point, the suspension of eviction for non-payment of rent does not mean the rent is forgiven, the tenant can still be pursued for payment AIUI. So keeping the current non-paying tenant is probably still a slightly better option than a 12 month void or 50%-80% or the current rent from a new one. Given they will probably start paying again eventually.