It's common for GP practices and medical centres to grant leases over units within or adjacent to their premises to commercial tenants, such as pharmacies, retail operators, food businesses, or organisations providing ancillary services. In most cases, these arrangements work well for landlords and tenants. Most importantly, patients benefit from convenient services located near and linked to the surgery.
However, in the current turbulent economic climate, difficulties can arise. More often than not, tenants reduce their rent payments. In the worst-case scenario, they stop paying altogether. If a commercial tenant doesn't pay rent on time, landlords have several enforcement options. These options can help recover sums due or end the lease.
In this article, part of our 'A legal toolkit for GPs' series, we review key legal options for GP practices. We focus on medical centres dealing with commercial tenants in rent arrears and outline the practical benefits and risks of each option.
Issuing a debt claim for rent arrears allows a landlord to pursue unpaid rent while keeping the lease intact. The process usually involves confirming the arrears owed. It also includes sending a formal letter before action. If the payment isn't made, you may need to start court proceedings.
If the claim is successful, the court may enter judgment requiring the tenant to pay the arrears which can be enforced in several ways. These include using enforcement agents, applying for an attachment of earnings order when possible, or seeking a charging order.
The key advantage of this route is that it preserves the landlord–tenant relationship and the ongoing rent stream, making it suitable where the tenant remains in occupation and may be able to pay over time. It also avoids the disruption and finality of terminating the lease.
However, issuing a claim can be costly and time-consuming, particularly if the tenant defends the claim, which may significantly increase legal costs. Even if a landlord gets a judgment, recovery is not guaranteed if the tenant cannot pay. Unlike forfeiture, a debt claim does not address ongoing non-payment and does not allow the landlord to recover possession. Therefore, it may be less effective when the tenant’s finances are weak.
This is a formal written demand for payment. It must state the amount due. It must give the tenant 21 days to pay, secure, or agree the debt. If the tenant fails to comply within that period, they are deemed insolvent, entitling the landlord to present a winding-up petition for a company or a bankruptcy petition for an individual.
A statutory demand may only be served on an individual tenant where the debt exceeds £5,000. In the case of a company tenant, the debt must exceed £750. Importantly, the debt must be undisputed. If the tenant has raised genuine concerns regarding the validity or amount of the arrears, this route should not be pursued, as the demand may be set aside with adverse costs consequences for the landlord.
The main advantage of this option is its speed and commercial pressure. The threat of insolvency proceedings often prompts rapid payment without the need for lengthy litigation, making it cost-effective at the demand stage. However, insolvency proceedings themselves can be expensive and may result in limited recovery if the tenant has insufficient assets. This approach can also seriously damage the landlord–tenant relationship and is therefore most suitable where arrears are substantial, undisputed, and other recovery methods have failed.
Where a landlord has the benefit of a third-party guarantee and/or a rent deposit deed, additional contractual routes may be available to recover arrears without pursuing the tenant directly. The first step is to review the relevant documentation carefully, as recovery will be governed strictly by the terms of the guarantee or deed. Legal advice should be sought before taking any enforcement steps.
Enforcement typically involves serving a formal written demand on the guarantor and/or drawing down on the rent deposit in accordance with the deed. Rent deposits usually allow the landlord to apply the deposited sum towards outstanding rent and other sums due. If a guarantor fails to pay following demand, the landlord may issue court proceedings directly against the guarantor, often without needing to conclude action against the tenant.
The principal advantages of this approach are speed and certainty. Rent deposits provide immediate access to funds, while guarantors are often solvent and commercially motivated to resolve arrears promptly.
However, guarantees and rent deposit deeds are construed strictly, and any procedural error or lease variation may compromise enforceability. Rent deposits are also finite and may not cover substantial arrears, potentially giving rise to further disputes. This route is therefore most effective where documentation is robust and the security provided is sufficient.
When granting or renewing commercial leases, guarantees and rent deposits can provide valuable comfort and certainty where there are concerns about a tenant’s ongoing solvency.
Commercial rent arrears recovery (CRAR) allows a landlord to recover pure rent arrears by instructing enforcement agents to take control of and sell a tenant’s goods. You can obtain this remedy only if you let the premises solely for commercial purposes and the arrears must relate only to rent. This excludes service charge, insurance, interest, and VAT.
Before enforcement can take place, the landlord must give at least seven clear days’ written notice of enforcement, and at least seven days’ net unpaid rent must be outstanding both at the date of the notice and at enforcement. If payment is not made, enforcement agents may attend the premises to seize goods, subject to statutory restrictions.
Commercial rent arrears recovery is a relatively quick, court-free remedy that can exert immediate pressure on a tenant who remains in occupation and is trading. However, it's ineffective where the tenant has few valuable goods or where goods are subject to third-party ownership or finance. It can also damage the landlord-tenant relationship and draw attention to the tenant’s financial difficulties, making it most suitable where the tenant is actively trading and has tangible assets of value.
Forfeiture allows a landlord to bring a lease to an end where the tenant has failed to pay rent or has otherwise breached the lease. This remedy is only available where the lease contains an express forfeiture clause and all contractual and statutory conditions have been satisfied. In cases of non-payment of rent, forfeiture may usually be exercised once rent is overdue, provided the right has not been waived.
Forfeiture may be effected by peaceful re-entry, without the use of force, or by issuing court proceedings for possession. The key advantage of forfeiture is that it enables a landlord to regain control of the premises relatively swiftly, limit ongoing losses, and re-let the property. The threat of forfeiture can also prompt payment, particularly as tenants may need to apply for relief from forfeiture to have the lease reinstated.
However, forfeiture is a drastic step. It brings the lease to an end and may extinguish future rental income. Procedural missteps, such as demanding rent after the right to forfeit has arisen, may amount to a waiver and prevent forfeiture altogether.
If a tenant applies for relief from forfeiture, the landlord may incur further legal costs, delay, and uncertainty, and the court may reinstate the lease upon payment of arrears. In some cases, alternative remedies - such as negotiated payment plans or debt recovery - may therefore be more commercially appropriate.
Rent arrears in commercial leases present significant legal and financial challenges for medical practices, but landlords are not without remedies.
The most effective outcomes are often achieved where landlords engage with tenants at an early stage, maintain open lines of communication, and take a proactive and strategic approach to enforcement. Early engagement may lead to negotiated solutions - such as payment plans or temporary concessions - that preserve relationships and avoid escalation, while timely and informed decision-making helps ensure that valuable enforcement rights are not inadvertently waived.
Where arrears persist, landlords should act decisively and seek legal advice to identify and deploy the most appropriate remedy, balancing the need for recovery against the long-term value of the asset and the continuity of patient-facing services. A considered and proactive approach will place landlords in the strongest position to protect their income and property interests.
Ashfords’ property disputes team can assist throughout this process and has direct experience advising medical practices on enforcement options relating to rent arrears. If you have any queries, please get in touch.
This article is a part of our 'A legal toolkit for GPs' series - a collection of articles designed to help GPs understand and navigate common legal issues they face in day to day practice. Find the full series below.
