What If My Commercial Tenant Stops Paying Rent?

When a commercial tenant stops paying rent, as a landlord, you face an immediate challenge that requires decisive action. The longer rent arrears accumulate, the more complex and costly recovery becomes. Whether you ultimately want to preserve the tenancy or regain possession and find a new tenant, understanding your legal rights and the remedies is essential. 

This guide walks you through some practical steps commercial landlords should consider taking when facing non-payment of rent, from initial communication through to formal legal action. Acting promptly while avoiding common pitfalls—particularly inadvertent waiver of your right to forfeit—can make the difference between swift resolution and prolonged financial difficulties. 

Immediate steps if your commercial tenant stops paying rent 

Before diving into complex legal procedures, you need to act quickly and methodically. Non-payment of rent typically means one or more missed rent dates—in England and Wales, commercial rent commonly falls due quarterly on the standard quarter days: 25 March, 24 June, 29 September, and 25 December. 

When your tenant fails to pay on the due date, every day of delay matters. Here is a simple five-step checklist to follow immediately: 

1. Check the lease agreement – Review the rent payment clause, forfeiture clause, notice requirements, and any clauses about the breaches of lease covenants and recovery of costs and expenses; 

2. Calculate the arrears precisely – Document exactly what is owed, including any interest provisions and the dates each sum became due; 

3. Contact the tenant the same day – Depending on the circumstances and your objective, make initial contact by phone or email to establish whether this is an oversight, a temporary cash-flow issue, or something more serious; 

4. Keep written records – Document all communications, including dates, times, and what was said or agreed 

5. Avoid actions that could waive forfeiture rights – Do not accept part payment, issue routine rent demands/service charge demands for future quarters, or negotiate new terms without legal advice 

This final point deserves emphasis. After the right to forfeit has arisen, accepting a part payment from a tenant after you know about the breach can waive your right to forfeit the lease for those arrears. Similarly, any act that recognises the lease as continuing—such as demanding the next quarter’s rent or service charge —may undermine your legal position and waive your right to forfeit the lease. 

From the outset, decide whether your objective is to keep this tenant and recover payment, or to regain possession of the property and secure a new tenant. This decision shapes which remedies you pursue and in what order. 

First steps – communicating with the tenant and understanding the problem 

Depending on your objective, early, structured communication can often resolve rent arrears without expensive and time-consuming litigation. Before reaching for formal legal remedies, understanding why the tenant has stopped paying rent helps you choose the right approach. 

Contact the tenant directly and ask what has caused the missed payment. Common explanations include: 

• Temporary cash-flow problems due to seasonal fluctuations or a one-off expense 

• Longer-term financial difficulties suggesting potential insolvency 

• A dispute over service charges or other lease obligations 

• Allegations that the landlord has failed to carry out repairs or maintenance 

It is important to understand that tenants are generally, under many modern commercial leases, not entitled to withhold rent unilaterally, even if they allege the landlord has breached repair obligations. While such allegations may be relevant to any eventual dispute, they do not automatically justify non payment. 

If the tenant claims financial difficulties, consider requesting supporting evidence such as: 

• Recent management accounts 

• Cash-flow forecasts 

• Evidence of finance applications or investor discussions 

This information helps you assess whether the problem is genuinely temporary or reflects structural insolvency. Where arrears relate to only one or two quarters, the tenant has a solid payment history, and the underlying business appears viable, a short-term payment agreement may be worth discussing. 

Critical warning: Accepting part payments or agreeing to vary payment dates without a carefully drafted written agreement may waive your right to forfeit the lease for those arrears. It may also amount to a permanent variation of the lease terms. 

Any informal discussions could be followed up with a “without prejudice” letter or email that: 

• Summarises what was discussed 

• Makes clear that no legal rights are being waived 

• Confirms any provisional arrangements are subject to formal documentation 

We would recommend that you obtain legal advice before entering into communication with the tenant.   

What if an agreement with the tenant cannot be reached? 

If dialogue fails, the tenant continues to default, or arrears are mounting—for example, two or more consecutive quarters remain outstanding—you may well decide to move to formal remedies. 

Commercial landlords have several potential legal options available, depending on the circumstances of each case, including: 

• Forfeiture of the lease – Terminating the tenancy and re-entering the property 

• Drawing down on a rent deposit – Using security held under a rent deposit deed to cover arrears 

• Een borgsteller of voormalige huurder vervolgen – Claiming from third parties who guaranteed the lease obligations 

• Court proceedings – Issuing a debt claim to obtain judgment and enforce payment 

• Invordering van commerciële huurachterstanden (CRAR) – Instructing enforcement agents to seize and sell tenant goods 

• Statutory demand and insolvency proceedings – Serving formal demands that may lead to bankruptcy or winding up petition 

These options are not mutually exclusive. You can sometimes use them in sequence—for example, forfeiting the lease and then pursuing a guarantor for outstanding rent. However, timing and waiver issues must be managed carefully to avoid undermining your position. 

The best option depends on several factors: 

• The tenant’s apparent solvency 

• The strength of the local rental market 

• The amount and age of the arrears 

• Your commercial objectives as landlord 

Should I commence forfeiture proceedings to end the lease? 

Forfeiture is the landlord’s right to terminate the lease and re-enter the property when the tenant is in material breach of their obligations. This remedy is only available if the lease contains a forfeiture clause—sometimes called a “re-entry clause.” 

Most commercial leases in England and Wales include such a clause, typically triggered when rent remains unpaid for a specified period, commonly 14 or 21 days after the due date. The clause usually states this applies “whether formally demanded or not,” removing the need for a formal demand. 

Two methods of forfeiture exist: 

• Peaceable re-entry – Changing the locks when the premises are vacant and unoccupied, without using force or causing a breach of the peace 

• Court possession proceedings – Issuing a claim for forfeiture through the courts, leading to a court order for possession 

Before proceeding, consider these commercial factors: 

• Is there strong demand for this type of unit in the area? 

• How long might it realistically take to secure a new tenant paying market rent? 

• Are you willing to lose any prospect of ongoing rent from the existing tenant? 

The risk of relief from forfeiture: Tenants can apply to the court for relief from forfeiture. If they pay all arrears, interest, and the landlord’s reasonable costs, the court is likely to grant relief and have the lease reinstated. This means forfeiture may only provide temporary pressure rather than a final solution, particularly where the tenant has access to funds. 

Waiver is a critical concern. Any act by you or your agents that recognises the lease as continuing—while you know of the breach—can waive your right to forfeit. The most common example is demanding or accepting rent that falls due after the breach. 

Non-payment of rent is treated as a “once and for all” breach. Waiving your right to forfeit for the March quarter arrears does not automatically prevent you from forfeiting for future missed payments. However, waiver can seriously weaken your position and complicate subsequent action. 

Once you have decided to forfeit the lease, you should: 

• Stop issuing routine rent demands 

• Avoid negotiating ongoing occupation terms 

• Seek legal advice before any communication that might be interpreted as affirming the lease 

Practical points when forfeiting a commercial lease 

Before instructing enforcement agents to carry out peaceable re entry, take these preparatory steps: 

• Confirm the precise wording of the forfeiture clause 

• Ensure that the lease does not include any residential parts  

• Calculate arrears to the nearest day, including any contractual interest 

• Check whether the right to forfeit has been waived 

When re-entering: 

• Use certificated enforcement agents or solicitors experienced in commercial forfeiture 

• Prepare an inventory of any tenant’s goods left on the premises 

• Photograph the property condition with dated and time-stamped images 

After regaining possession: 

• Secure and store any tenant goods reasonably, giving the tenant opportunity to collect them 

• Consider business rates liability and insurance requirements 

• Begin marketing the premises promptly if reletting is your objective 

Can I draw down on the rent deposit to cover arrears? 

Many commercial leases are supported by a rent deposit deed, under which the tenant provides a sum—typically three to six months’ rent plus VAT—held by the landlord as security for rent and other sums due under the lease. 

Where a rent deposit exists, you may be able to draw down on it to cover unpaid rent, interest, and sometimes service charges or insurance rent, depending on the specific wording of the deed. 

When drawing down makes commercial sense: 

• The arrears relate to an isolated missed quarter 

• The tenant has a good payment history overall 

• There is a realistic expectation the tenant will replenish the deposit within a fixed period (commonly 30-60 days) 

When you might preserve the deposit instead: 

• The tenant’s long-term solvency is doubtful 

• You anticipate further defaults and want security for future arrears 

• You are considering forfeiture, CRAR, or pursuing guarantors 

The waiver risk: Using the deposit to settle arrears can, depending on the documents and timing, be treated as affirming the lease. This may waive your right to forfeit for that particular non-payment. Therefore, if forfeiture is a possibility, you should consider this possibility and make that decision before drawing down on the deposit. 

Example timeline: 

Date	Evenement
24 June 2026	Quarterly rent due
15 July 2026	21 days passed, arrears confirmed
Mid-July 2026	Landlord decides: forfeit first, or draw down on deposit
Late July 2026	If forfeiting: proceed with re-entry; if not: draw down and require tenant to replenish

Could I pursue a guarantor or former tenant for the arrears? 

Many commercial leases include a personal or corporate guarantor who promises to pay rent and perform the tenant’s obligations if the tenant defaults. Where the lease structure permits, you may be able to pursue parties beyond the current tenant. 

The distinction between “old” and “new” leases is fundamental: 

• Old leases (granted before 1 January 1996): The original tenant may remain liable for the full term, even after assigning the lease 

• New leases (granted on or after 1 January 1996): When a tenant assigns the lease, they are generally released from future liability, unless they entered into an Authorised Guarantee Agreement (AGA) 

Under an AGA, the outgoing tenant guarantees the incoming assignee’s performance for as long as that assignee remains tenant—but not beyond. 

Who can you pursue for rent arrears? 

• The current tenant 

• Any guarantor named in the lease or a supplemental deed 

• For old leases, the original tenant 

• Where an AGA exists, the former tenant who gave the guarantee 

The Section 17 notice requirement is critical. To recover a fixed charge (such as principal rent, service charge, or insurance rent) from a former tenant or their guarantor, you must serve a written Section 17 notice within six months of the sum becoming due. Miss this deadline, and you may well lose the right to claim that particular sum from that party entirely. 

Voorbeeld: If quarterly rent of £25,000 fell due on 25 March 2026, you must serve the Section 17 notice by 24 September 2026 to preserve your claim against a former tenant or guarantor. 

A further consideration: A party who pays in full following a valid Section 17 notice may be entitled under Section 19 of the Landlord and Tenant (Covenants) Act 1995 to call for an “overriding lease.” This could effectively make them your direct tenant for the remainder of the term. Consider carefully whether you want a potentially troubled guarantor or former tenant to acquire this position. 

Assessing covenant strength before action 

Before sending a Section 17 notice or formal demand to a guarantor, assess whether that party can actually pay: 

• Check Companies House filings for corporate guarantors 

• Review recent accounts for signs of financial difficulties 

• Consider credit agency reports 

There is little benefit in incurring legal costs to pursue a guarantor who is already insolvent or subject to restructuring. Focus your resources on parties with genuine ability to pay. 

Should I issue court proceedings to recover rent arrears? 

You can issue court proceedings to recover debt from your commercial tenant without immediately ending the tenancy. This approach keeps the lease alive while pursuing the outstanding rent through the legal system. 

Benefits of court proceedings: 

• If the tenant has no real defence, you could possibly seek a summary judgment and obtain a County Court Judgment (CCJ) or High Court judgment relatively quickly 

• A judgment can be enforced against the tenant’s assets or bank accounts 

• The threat of judgment and enforcement often encourages payment 

• A pre-action letter from commercial property solicitors, clearly setting out arrears, interest, and costs, often prompts settlement without a full claim 

Drawbacks to consider: 

• If the tenant defends the claim, proceedings can be lengthy and costly 

• A tenant close to insolvency may have no assets against which to enforce 

• Contested claims may involve counterclaims (for example, alleging the landlord failed to repair) 

Practical tip: If you obtain a judgment exceeding £600, you can transfer it to the High Court for enforcement by High Court Enforcement Officers, who are often faster and more effective than County Court bailiffs. 

Waiver warning: Issuing proceedings for arrears can be compatible with maintaining the tenancy, but be careful. If you intend to forfeit, do not take actions that treat the lease as ongoing, as this may waive your right to forfeit. 

Enforcement options after obtaining judgment 

Once you have a court judgment, several enforcement methods are available: 

• Enforcement agents – Instructing agents to seize goods belonging to the tenant 

• Third Party Debt Order – Freezing sums in the tenant’s bank accounts 

• Charging Order – Securing the debt against real property owned by the tenant 

The choice depends on what assets the tenant has and where they are located. If information is limited, you can apply for an Order to Obtain Information, compelling the tenant to attend court and disclose details of their assets and income. 

How can I use Commercial Rent Arrears Recovery (CRAR)? 

Commercial Rent Arrears Recovery—commonly known as CRAR—is a statutory procedure under the Tribunals, Courts and Enforcement Act 2007 that allows commercial landlords to recover rent arrears without going to court. 

CRAR permits you to instruct certificated enforcement agents to take control of and sell the tenant’s goods to recover principal rent. 

Key requirements and limitations: 

• The premises must be let wholly for commercial use under a written lease 

• CRAR can recover principal rent, VAT, and interest 

• It cannot recover service charges or insurance premiums unless these are expressly reserved as rent in the lease 

The CRAR timeline: 

Step	Timing
Rent must be overdue	At least 7 days
Notice of Enforcement served	Gives at least 7 clear days (excluding Sundays and bank holidays)
Enforcement agents attend	After notice period expires
Entry method	Through open or unlocked doors only (no forced entry on first visit)
Action taken	Take control of goods, agree Controlled Goods Agreement, or remove goods for sale

CRAR can sometimes be exercised against sub tenants by giving notice requiring them to pay rent directly to you until the arrears are cleared. 

Advantages: 

• No need to instigate court proceedings 

• Clear statutory framework with defined timelines 

• Strong leverage where the tenant has valuable stock or equipment on site 

Limitations: 

• Not available where premises are partly residential 

• Ineffective where the tenant has few or no seizable assets 

• Does not terminate the lease—the tenancy continues 

Should I serve a statutory demand and consider insolvency proceedings? 

A statutory demand is a formal written demand for payment of an undisputed debt. Where there is no genuine dispute early about the amount owed, serving a statutory demand can be a powerful tool to encourage payment—or provide grounds for insolvency proceedings if payment is not made. 

Current thresholds in England and Wales: 

Debtor type	Minimum debt	Consequence of non-payment
Individual	£5,000	May support bankruptcy petition
Company	£750	May support winding up petition

The process: 

1. Serve the statutory demand on the tenant 

2. The tenant has 21 days to pay in full or reach a satisfactory agreement 

3. If they fail to pay and do not dispute the debt on substantial grounds, this may evidence inability to pay debts as they fall due 

4. You may then present a bankruptcy petition or winding up petition 

Often, the threat alone is sufficient. Many tenants who can pay but are prioritising other creditors will find funds quickly when faced with potential insolvency. 

Warning: If there is a real dispute about the amount owed—for example, a genuine argument over service charge calculations or whether the premises have been rendered unusable—the tenant can apply to set aside the statutory demand. If successful, you may be ordered to pay the tenant’s legal costs, which can be substantial. 

Statutory demands and insolvency proceedings test solvency, not the detailed merits of lease disputes. They should not be used as a purely commercial debt collection shortcut where the underlying claim is genuinely contested. 

Should I negotiate a structured payment agreement with my commercial tenant? 

Where the tenant is otherwise solvent and the arrears result from short term difficulties—such as a temporary downturn in trade or an unexpected expense—a carefully drafted payment agreement can preserve the landlord tenant relationship while recovering payment over time. 

A payment plan should typically include: 

• A schedule for clearing historic arrears over a defined period (commonly 6-12 months) 

• Clear dates and specific amounts for each instalment 

• Confirmation that ongoing rent must be paid in full and on time, in addition to arrears instalments 

• Interest on arrears at a specified rate 

Critical drafting points: 

• Distinguish clearly between arrears and future rent obligations 

• Preserve the landlord’s rights to forfeit the lease for future breaches 

• Include robust default provisions—for example, if an instalment is missed, the landlord may forfeit immediately or accelerate remaining arrears 

The agreement should be documented as a formal side letter or deed of variation, expressly stating that it does not waive any existing landlord rights except where explicitly mentioned. 

Benefits of a payment agreement: 

• Maintains the landlord-tenant relationship 

• Keeps the property occupied and generating income 

• Avoids the cost, delay, and uncertainty of litigation or reletting 

• Allows a tenant experiencing a temporary reduction in trade to recover 

Limitations: 

• If the tenant’s business is structurally unviable, a payment plan may only defer the problem 

• Arrears may continue to grow if the tenant defaults on the plan itself 

• Landlords should obtain financial information before agreeing to ensure the plan is realistic 

Conclusion – choosing the right remedy when a commercial tenant stops paying rent 

When a commercial tenant stops paying rent, you must quickly decide between two broad strategies: preserving the tenancy through structured solutions like payment agreements, rent deposit drawdown, CRAR, or court claims; or terminating the tenancy through forfeiture, potentially combined with action against guarantors to recover payment. 

No single remedy fits every situation. Your decision should consider: 

• The tenant’s apparent solvency and willingness to pay 

• The strength of the local rental market and prospects for a higher rent from a new tenant 

• The level and duration of outstanding rent 

• Your broader portfolio strategy and appetite for risk 

Throughout this complex process, avoiding inadvertent waiver of your forfeiture rights is essential. Accepting rent, agreeing informal arrangements, or taking actions that affirm the lease can undermine your legal position. 

Given the financial stakes and legal complexity involved, landlords should seek legal advice before taking substantive steps—particularly before forfeiting, drawing down deposits, serving Section 17 notices, or issuing statutory demands. Early specialist guidance from experienced commercial property solicitors can protect your position and help you achieve the best outcome for your circumstances. 

If you are facing rent arrears from a commercial tenant and need tailored advice on your specific lease, arrears schedule, and objectives, contact Senior Litigation Partner, David Burns on D.Burns@rfblegal.co.uk or direct dial 0207 467 5751 to discuss your options.