A tenant is obliged to pay rent under a lease or tenancy agreement. There is no requirement that the landlord demands payment of the rent from the tenant. However, a demand for rent can serve as a useful reminder to ensure that the tenant pays the rent in full and on time.
A landlord may only take enforcement proceedings under a lease or tenancy agreement after the rent has been formally demanded or is more than six months overdue. There is a set procedure by which rent may be formerly demanded. It is possible for the landlord to exclude the requirement to formerly demand rent.
A demand for rent letter should be sent to advise a tenant that the rent is due. The document should set out the way in which the tenant is to pay the rent to the landlord. It is becoming increasingly common to transfer money by bank transfer rather than to rely on the post to deliver cheques.
If the tenant fails to pay the rent, which they promise or contract to pay under the lease, the landlord can take the following actions.
The landlord may commence court action against the tenant for recovery of rent.
If the sum owed exceeds £750, the landlord may consider serving a statutory demand on the tenant with a view to commence bankruptcy proceedings against them. However, the landlord has to bear in mind that the bankruptcy of the tenant may reduce the chance of them getting paid in full since the landlord will become an ordinary unsecured creditor on the bankruptcy of the tenant.
This is the landlord's common law remedy to enter upon the demised premises to seize chattels to the value of the debt. Usually, a certificated bailiff acting on the landlord's behalf will carry out the distress. Certain goods on the premises cannot be distrained against, e.g. cash, perishable goods, tools of the tenant's trade up to £150 in value, things in actual use and goods delivered to the tenant pursuant to their trade. This common law right will be abolished in the near future for commercial property by a similar statutory process known as Commercial Rent Arrears Recovery. Currently, the process is scheduled for implementation in April 2012.
If the premises have been sub-let, the head landlord can serve notice on the sub-tenant requiring them to pay their rent to the head landlord until the arrears are paid off. There are some conditions that the head landlord must fulfil before doing this so legal advice is essential.
If a tenant breaches a covenant under the tenancy the landlord may have the right to re-enter the property to end the tenancy. This is known as forfeiture. The landlord can only forfeit a tenancy if such a right for breach of particular terms of the tenancy and is expressly reserved in the tenancy.
When forfeiting a tenancy, the landlord can either issue proceedings for recovery of possession or peacefully re-enter the premises. Usually, the first method will be used, as the landlord does not want to run the risk of any claim of violent re-entry.
It is possible for a landlord to waive their right of forfeiture. This will occur if the landlord, knowing of the breach, performs an act that recognises the continued existence of the tenancy.
For example, if a landlord still demands rent after the right to forfeit has arisen this will amount to a waiver. The reason for this is that the act of demanding rent recognises that the tenancy is continuing even after the breach has occurred. However, if the breach itself then continues, the right to forfeit, though waived on one occasion, will arise again.
Landlords should always get legal advice on their options in taking forfeiture action because it carries significant risks. For example, if not done properly, forfeiture can expose a landlord to a significant damages claim by the tenant.
In respect of forfeiture for non-payment of rent, the landlord must make a formal demand for rent before forfeiting, unless the tenancy exempts them from this obligation. To avoid the technicalities of a formal demand, most tenancies will provide for forfeiture if the tenant is a specified amount of time (often 21 days) in arrears (whether or not rent is formally demanded).
However, the tenant may apply to court for relief from forfeiture. If the landlord goes to court the action will be suspended if the tenant pays all the arrears of rent together with the landlord's legal costs before the hearing.