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Thursday, 11 June 2009

Top 11 Tips for Commercial Landlords in a Recession

Landlords are having a tough time at the moment with Tenants going to the wall each week. How can Landlords protect themselves from this climate of fear?

Here are our top 11 tips for landlords of commercial properties:

1. Keep a close eye on rent payment delays-this is an early warning of Tenants having difficulties

2. Check your lease terms for break options for both Landlord and Tenant. You don't want your Tenant disappearing unexpectedly. Equally if the tenant is a persistent late payer, you could be better off with a more finacially stable tenant. A Landlord's break option could be a blessing.

3. Is a rent deposit held for the tenant? Check the amount of the rent deposit and its terms for release and withdrawal.

4. Check for personal guarantees from the existing tenant/previous guarantors or guarantors under an Authorised Guarantee Agreement. You might need to tap into these resources at short notice. Be prepared.

5. Put Tenant's information on your computer with parties under the lease, guarantors names and addresses and contact details, rent payment dates, rent review dates, break dates and notice periods. This will enable you to respond at a moment's notice if there is a problem. A simple Microsoft or Google spreadsheet would be more than sufficient for the purpose.

6. Check the dilipidations situation and if necessary commission an interim schedule of dilapidations and serve a Section 146 Notice and Schedule on the Tenant and its advisers. This is usually the biggest shock for any tenant. It may be that the Landlord has to tap into a rent deposit and guarantors if the premises has been allowed to deteriorate.

7. Charge interest if Tenant is frequently late in paying rent. Many Landlords forget to this and though the interest rates are not usually high, it adds up if a Landlord has a large portfolio.

8. Beat the receiver/adminstrator/liquidator. If an adminstration or liquidation order is made then there will be moratorium on the Landlord exercising its usual remedies in the event of tenant default.

9. Discuss with the Tenant ways of alleviating pressure eg. monthly rent payments, rent holidays, rent decreases

10. Distrain for rent arrears either by seizing the Tenant's goods or by taking walking possession. This ancient remedy may disappear in the future and see Point 8 in an insolvency scenario.

11. Speak to your legal adviser about other possible solutions. There are often things which a lawyer can spot which the Landlord hasn't spotted. Send a copy of the Lease to your adviser as quickly as possible. It might save you some money.