Landlords who know their legal position vis-à-vis their tenants and former tenants are better equipped to minimise their risks and act quickly when they need to if, for example, Brexit and global trade issues look like they’re going to lead to a downturn. See what to look out for and what to do when you spot the danger signs.

There are certain warning signs that a tenant might be in trouble that you can look out for if you are a landlord – though don’t be too paranoid, because some of them could equally be sound business practice on their part. But you need to plan for what you are going to do if you spot one of these signs.

Examples include requests from tenants, such as:

  • to pay rent monthly rather than quarterly, to help their cashflow;
  • a reduced or varied rent, or rent holiday, in return for an earlier rent review than provided for in their lease;
  • a reduced or varied rent, or rent holiday, in return for reduced rights under a break clause;
  • extending the use to which a property can be put, to allow a more profitable activity;
  • allowing assignment and subletting;
  • extending the term of the lease in return for a lower rent or a rent holiday.

Letting arrears build up, relying on a tenant’s promises that all will be well, can be a costly mistake. Once you have made concessions to one tenant, others may consider you a soft touch and you could be last in line when they are deciding who to pay first.

Be alert to other signs – maybe changes in your tenant’s behaviour, such as late payment of rent without good reason, or restructuring of their business, which could indicate a potential insolvency.

Take legal advice immediately you think a tenant is, or may become, insolvent as your rights will depend on the type of insolvency proceedings. Experience shows that early contact with an insolvency practitioner (the person appointed to sort matters out in an insolvency) generally leads to a better outcome. You may need to negotiate with the insolvency practitioner if you want to get your premises back. You’ll need advice to safeguard your position.

Forfeiting the lease of an insolvent tenant, or accepting a surrender of the lease from them, can seem attractive, but take legal advice before taking this step. There may be better options.

Generally, tenants are more likely to challenge service charges, and repair and maintenance obligations in a downturn. Ensure you can justify charges as reasonable. They will also be more aware of their rights under break clauses, and their rights to assign or sub-let.

Where a lease is coming to an end, tenants are likely to negotiate – for a shorter term, lower rent, earlier break clauses or extended rights to sub-let all or part of the property. Expect more trouble over maintenance and repair payments. Ensure you are prepared.

In all these circumstances, specialist, professional advice can itself be a sound investment…

In contentious business, a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement.