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11 August 2022

Opinion from Adrian Leopard & Co

News impacting business from Adrian Leopard & Company - Insolvency Practioners & Mediators

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Possession proceedings for commercial premises – there are two sides to every story – and there could be quite a few sides
Adrian Leopard 334

Possession proceedings for commercial premises – there are two sides to every story – and there could be quite a few sides

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Perhaps landlords and tenants should think about mediation before embarking on the litigation route to resolve their differences

As the pandemic rolls on, the cries are getting louder for the government to extend the moratorium in respect of possession proceedings for commercial premises where rents are in arrears due to coronavirus. One hospitality business association is now saying that if the moratorium is not extended the government will face a “bloodbath” of business failures. There is certainly no lack of fervent language being used.

The moratorium preventing evictions expires on the 30th September, that is in two weeks. After that, landlords will be able to go ahead with their evictions, depending presumably on what stage their proceedings had already reached. Of course it is always open to tenants to oppose the proceedings if they can put a cogent case to a judge for deferral.

However, while there is all of this angst being suggested on behalf of tenants, what about landlords? They too are parties to these tenancies and they too have their own financial problems to wrestle with. If a landlord thinks that he will be better off by getting vacant possession, then there must come a point when he ought to be entitled to do so. After all he has already been restricted in his actions for the benefit of his tenant for a number of months.

What are the solutions? A tenant may say that he has a viable business but for the fact that he is in arrears. Indeed, many are saying just that. If that is right, then why can he not come to an accord with his landlord? Why can he not go to his bank and ask for some help to cover the rent while his apparently viable business continues to earn funds to cover it?

By the same token a landlord may feel that he has a better chance of re-letting his premises to a new tenant than having to wait for an indeterminate period to recover his lost rent. Should he have to wait while his tenant asserts that “he hopes everything will be all right eventually”?

Whatever happened to negotiation? Perhaps this is the time when landlords and tenants ought to take a step back and before marching down the possession proceedings route, what about entering into negotiation or perhaps mediation? Mediation is a very good way of establishing what is and is not possible and if a business is truly viable, then why would a landlord want to go to the time, trouble and expense of getting vacant possession, may be to have an empty premises on his hands? It makes no sense. On the other hand, the landlord may have the perfect new tenant waiting in the wings and in such circumstances, why should he not do what is best for himself?

Of course the consequences of a landlord getting possession could be quite far-reaching. Not only will he get judgement for arrears of rent he could have a claim for future rent and he will almost certainly come up with a claim for dilapidations. What are dilapidations? These are effectively the costs relating to putting premises back into good order; they could just be re-decorating or they could be much more expensive. I recall once a hairdresser converting a room in a building he rented into a second salon. To this end he needed to install special wash basins in the room suitable to wash clients’ hair.

Everything was fine until the lease came to an end and the hairdresser decided not to renew it. The cost of removing the wash basins, disconnecting the water supply, restoring the cut flooring back to where it was was all quite expensive and from the landlord’s point of view, a legitimate dilapidations claim.

Who would have thought it?

Dilapidations are not just putting right parts of the premises which have fallen into disrepair. So again negotiation may enable a tenant who is going to lose his tenancy to mitigate his losses.

Mediation is always cheaper than litigation!

Adrian Leopard 14-09-20

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