Commercial Landlord & Tenant.

Whether a landlord can refuse consent depends on the lease and the type of consent. Where a lease permits assignment, subletting, or alterations subject to the landlord's consent, the Landlord and Tenant Act 1927 (for alterations) and the Landlord and Tenant Act 1988 (for assignment and subletting) provide that consent must not be unreasonably withheld or delayed. The landlord must give a decision within a reasonable time and provide reasons for any refusal. What is reasonable depends on the circumstances — a landlord can reasonably refuse consent to an assignment where the proposed assignee is of poor financial standing, but cannot refuse on grounds unconnected with the landlord-tenant relationship. For assignment, the lease may set out specific conditions that the landlord can require, such as an authorised guarantee agreement. Where a landlord unreasonably refuses or delays consent, the tenant may proceed without consent or claim damages. Both parties should take advice on whether a refusal is reasonable.

Commercial landlord and tenant disputes can be resolved through a range of routes depending on the nature of the dispute. Many are resolved by negotiation between the parties or their solicitors. Where negotiation fails, options include: mediation, which is increasingly encouraged and has a good success rate; expert determination, particularly for rent review and valuation disputes; arbitration, where the lease provides for it; and litigation in the County Court or the High Court, depending on the value and complexity. Specific types of dispute have particular routes — for example, dilapidations disputes are subject to the Dilapidations Protocol, and 1954 Act renewal disputes follow the statutory process. The cost and time of litigation mean that resolving disputes by negotiation or mediation is usually preferable where possible. Taking early legal advice when a dispute arises — before positions become entrenched — gives the best prospect of an efficient resolution.

A commercial landlord's obligations are determined primarily by the terms of the lease, with relatively little statutory intervention compared to residential tenancies. Typical obligations include: granting the tenant quiet enjoyment of the premises — the right to occupy without unlawful interference from the landlord; insuring the building (the cost usually recovered from the tenant); maintaining and repairing the structure and common parts where the lease so provides, with the cost recovered through a service charge; and complying with any specific obligations set out in the lease. The landlord must also act reasonably where the lease requires their consent — for example to assignment or alterations — under the Landlord and Tenant Act 1988. Beyond the lease, landlords have obligations under health and safety, fire safety, and energy efficiency legislation. The precise obligations depend on the lease, which is why careful drafting and review matter.

A commercial tenant's obligations are set out in the lease and typically include: paying the rent on the due dates, together with any VAT; paying the service charge and insurance rent; keeping the premises in repair in accordance with the repairing covenant; using the premises only for the permitted use; not making alterations without consent; not assigning or subletting except in accordance with the lease; complying with statutory requirements relating to the premises; and yielding up the premises in the required condition at the end of the term. Breach of any of these obligations can have serious consequences, including a claim for damages, forfeiture of the lease, or a dilapidations claim at the end of the term. Tenants should understand the full extent of their obligations — particularly the repairing and reinstatement covenants, which can carry significant cost — and seek advice if difficulties arise.

A commercial landlord has several remedies for non-payment of rent. These include: forfeiting the lease (ending it and recovering possession), where the lease contains a forfeiture clause and the correct procedure is followed; using the Commercial Rent Arrears Recovery (CRAR) procedure to seize and sell the tenant's goods to recover the arrears; drawing on any rent deposit held; pursuing any guarantor or former tenant who remains liable; and issuing court proceedings to recover the debt. Each remedy has its own requirements and consequences, and some are mutually exclusive — for example, taking certain steps can waive the right to forfeit. The right remedy depends on the circumstances, including the amount owed, whether the tenant is likely to pay, the value of the lease, and whether the landlord wants to keep or remove the tenant. Taking legal advice before acting ensures the landlord chooses the right remedy and does not inadvertently lose other rights.

Commercial landlord and tenant law governs the ongoing relationship between landlords and business tenants throughout the life of a lease — from the operational obligations of each party, through the management of issues that arise during the term, to the enforcement of the lease and its eventual end. It covers: the respective obligations of landlord and tenant; the landlord's remedies for non-payment of rent and other breaches, including forfeiture and the CRAR procedure; rent deposits and guarantees; consents for assignment, subletting, and alterations; dilapidations at the end of the term; and the handling of tenant insolvency. It overlaps with — but is distinct from — the law on granting commercial leases and the statutory renewal regime under the Landlord and Tenant Act 1954. Both landlords and tenants benefit from understanding their rights and obligations, and from taking advice when issues arise rather than after they have escalated.

When a commercial tenant becomes insolvent, the landlord's position depends on the type of insolvency process and the terms of the lease. Different procedures have different consequences: in administration, a statutory moratorium prevents the landlord from forfeiting or taking enforcement action without the consent of the administrator or the court; in liquidation, the liquidator may disclaim the lease, ending the tenant's liability but potentially leaving the landlord without a tenant; in a company voluntary arrangement (CVA), the tenant may propose to reduce or restructure its rent obligations, which can bind the landlord if approved by the requisite majority of creditors. The landlord may be able to pursue any guarantor or rent deposit, and former tenants may remain liable in some circumstances. Tenant insolvency is a complex area where the landlord's remedies are constrained by insolvency law, and prompt specialist advice is essential to protect the landlord's position.

A dilapidations claim arises where a commercial tenant has failed to comply with its repairing, decorating, or reinstatement obligations under the lease — usually assessed at or near the end of the term. The landlord prepares a schedule of dilapidations setting out the alleged breaches and the cost of putting them right, and serves it on the tenant. The tenant can dispute the schedule — for example, on the grounds that the items are not within the repairing obligation, that the works have been done, or that the cost is overstated. The landlord's damages are generally limited to the loss actually suffered, which under Section 18 of the Landlord and Tenant Act 1927 cannot exceed the diminution in the value of the landlord's interest caused by the disrepair. Dilapidations claims can be significant, and the Dilapidations Protocol encourages parties to exchange information and attempt settlement before litigation. Both landlords and tenants benefit from early specialist advice — including from a surveyor — on their respective positions.

A licence to alter is a formal document by which a landlord grants consent for a tenant to carry out alterations or improvements to the premises. Most commercial leases prohibit the tenant from making alterations — or certain categories of alteration — without the landlord's written consent. Where the tenant wishes to carry out works, the licence to alter records the landlord's consent and sets out the terms: a description of the permitted works, any conditions attached, the standard to which the works must be carried out, and — importantly — whether the tenant must reinstate the premises to their original condition at the end of the lease. The reinstatement provision is significant, as it can create a substantial liability at lease end. A licence to alter protects both parties: it gives the tenant authority to carry out the works and gives the landlord control over changes to its property. Tenants should take advice on the terms, particularly the reinstatement obligation, before carrying out works.

A rent deposit deed is an agreement under which a tenant pays a sum of money to the landlord at the start of the lease as security against the tenant's default — typically failure to pay rent or breach of covenant. The deed sets out: the amount of the deposit; the circumstances in which the landlord can draw on it; the tenant's obligation to top it up if it is drawn down; and the arrangements for its return at the end of the lease. A rent deposit gives the landlord a readily accessible source of funds to cover arrears or the cost of remedying breaches, without having to pursue the tenant through other remedies. The deed should specify how the deposit is held — whether in a separate account and whether interest accrues. Rent deposits are particularly common where a tenant is a new business, has a limited trading history, or is of uncertain financial standing. The deed must be carefully drafted to ensure the landlord can access the funds when needed.

Forfeiture is the landlord's right to bring a lease to an end and recover possession because of the tenant's breach — most commonly non-payment of rent, but also other breaches of covenant. The right to forfeit must be reserved in the lease. For rent arrears, the landlord can usually forfeit by peaceable re-entry — physically re-entering and changing the locks when the premises are empty — or by court proceedings. For other breaches, the landlord must first serve a notice under Section 146 of the Law of Property Act 1925 specifying the breach and giving the tenant the opportunity to remedy it. Forfeiture is subject to important safeguards: the tenant (and certain others, such as subtenants and lenders) can apply to court for relief from forfeiture, which if granted restores the lease. Landlords must also be careful not to waive the right to forfeit by, for example, accepting rent after becoming aware of a breach. Forfeiture is legally technical and specialist advice is essential.

Commercial Rent Arrears Recovery (CRAR) is a statutory procedure that allows a commercial landlord to recover rent arrears by taking control of and selling the tenant's goods. It replaced the old common law remedy of distress. CRAR can only be used for commercial premises, only for principal rent (not service charge or insurance), and only where a minimum amount of rent is overdue. The procedure requires the landlord to: give the tenant at least seven clear days' notice of enforcement; instruct an authorised enforcement agent to take control of the tenant's goods; and, if the arrears remain unpaid, sell the goods to recover the debt. CRAR is subject to detailed statutory requirements, and using it has consequences for other remedies — exercising CRAR waives the right to forfeit for the arrears in question. Landlords should take advice on whether CRAR is the appropriate remedy in the circumstances.