L&T - Tenant Arrears

Question 1

What methods could have been use to recover arrears?

Answer 1

• Payment Plan
• Rent deposits (draw down)
• Guarantors
• Legal Action

Question 2

What legal options are available?

Answer 2

• 7 day letter
• Charge for payment
• Bank arrestment
• Serve an attachment
• Wind Up Company
• Irritate the lease

Question 3

What is a charge for payment?

Answer 3

• A letter served by the solicitors which provides the tenant with 14 days to clear the arrears otherwise further action will be taken

Question 4

What is a bank arrestment?

Answer 4

• Instruct the Tenant’s bank to arrest funds held in their account
• The bank need not confirm payment for 21 days post-arrestment
• The monies are received 14 weeks post-arrestment unless either:
  o They can successfully challenge the arrestment or
  o Earlier payment/release is agreed upon

Question 5

what does serving an attachment entail?

Answer 5

• Attach the debt to moveable property that belongs to the Tenant and is within their possession (i.e. stored at the Premises)
• A Sheriff Officer will attend the Premises and value items to be sold at auction. The proceeds of the auction are used to repay creditors.

Question 6

What is Winding up a company?

Answer 6

• This involves lodging a petition at the Sheriff Court to wind up the Tenant. Once the court is satisfied that the company is insolvent, the petition is advertised in the Gazette.

Question 7

What does it mean to irritate the lease?

Answer 7

• The lease is officially terminated

Question 8

What are the two types of irritancy?

Answer 8

• Legal Irritancy – if no irritancy clause, then the Landlord can apply to the courts to terminate based on non payment of rent for two consecutive years.
• Conventional Irritancy – when there is a irritancy clause within the lease, it usually has certain conditions that need to be met:
  o Rent instalments that are 14 days late
  o Any other payments that are 14 days late
  o The tenants become insolvent
• Any other breaches to the tenants obligations

Question 9

Irritancy case law?

Answer 9

• Law Reform (Miscellaneous Provisions) (Scotland) Act 1985
• Introduction of a pre-irritancy notice to allow tenants time to remedy the breach
• 14 days notice required
• Must be sent recorded delivery
• Non monetary breaches – a court will only terminate the lease if fair and reasonable to do so
• If the breach can be remedied, then the tenant needs to be allowed reasonable opportunity to make good

Question 10

What is the difference between CVA, Administration and Liquidation?

Answer 10

• CVA – enter voluntarily, companies try to work with creditors, directors remain involved in the business
• Administration – Entered when a company cannot pat its debts, method to try and save the company and administrators appointed to take control
• Liquidation – company’s assets are liquidated and the company is dissolved

Question 11

If a tenant doesn’t occupy because they’re in administration, can a landlord go into a unit and remove the fit-out?

Answer 11

No, only once the lease has officially been terminated/irritated can the Landlord take possession