Rent Arrears Letter: What do they contain?
A rent arrears letter is sent to a commercial tenant to inform them:
- They are overdue in paying their rent
- The landlord is proceeding to take steps to reclaim the rent
- Of any potential legal proceeding should the rental arrears remain unpaid
There are varying kinds of rent arrears letter, depending on the stage of arrears the tenant is at. It is important for all parties to know what the letters may contain and when they can legally be sent.
What happens before a rent arrears letter is sent?
There may be valid reasons why a commercial tenant has not paid their rent, such as administrative difficulties with their bank, an issue with funds or a simple mistake regarding the payment due date.
Prior to entering into formal rental arrears proceedings, a landlord will send rent reminder letters.
The stages of rent arrears
Commercial rent is typically paid in advance on four agreed Old English Quarter days:
- March 25th
- June 24th
- September 29th
- December 25th
Occasionally a commercial lease agreement will require a monthly rental payment, but this is rare.
Payment may sometimes be made earlier than these dates. These payment dates are agreed in the terms of the lease. If the rent is even one day overdue, the tenant is deemed to be in arrears.
There are several different stages in the rent arrears process. Legally, a letter must be sent to the tenant at each stage to keep them fully informed regarding rent arrears proceedings:
- Letter 1 – a week after the agreed quarter date, a reminder letter will be sent to the tenant informing them their rent is in arrears.The tenant will also receive telephone calls and/or emails from either the landlord or the company who manages the commercial property on behalf of the landlord, to address and discuss the arrears and the tenant’s intention to pay.
- Letter 2 – 10 days after the date of the first letter, a second letter will be sent to the tenant. This will reiterate the contents of the first letter.Telephone calls and/or emails will continue at this stage.
- Letter 3 – after a further 10 days, a third letter will be sent to the tenant, stating the arrears will move into legal proceedings if the tenant continues to fail to pay.Telephone calls and/or emails will continue at this stage.If the tenant informs the landlord or the property management company of a valid reason they are struggling to pay the rental arrears, arrangements may be made to allow the tenant to pay the funds in instalments, or offer a reduced rent for a fixed time. If the tenant does not respond or make payment after three rent arrears letters have been sent, the arrears will be referred to a bailiff to recover the outstanding amount.
Once the arrears have been referred to a credit collection company, the tenant is no longer able to pay the landlord or the property management company directly. All communication and payments must be made directly to the credit collection company.
Commercial Rent Arrears Recovery (CRAR)
In some instances, commercial landlords are able to recover rent arrears without going to court using a process known as Commercial Rent Arrears Recovery (CRAR).
Introduced on 6th April 2014, the process replaced Distress for Rent and can only be utilised by certified enforcement agents.