When a commercial tenant falls behind in rental payments the landlord’s first and most practical option is to contact the tenant to learn the reasons for the default. Normally, disputes between the landlord and tenant, or interruptions in rental payments, can be resolved through professional, common sense dialogue between the parties.

In those cases where rental arrears cannot be resolved informally, it may be necessary to deploy legal remedies that are available either under the terms of the lease or under the provisions of the Commercial Tenancies Act.

What follows is a summary of the legal remedies available to landlords of commercial tenancies.

A commercial landlord generally has five legal remedies in response to a commercial tenant’s failure to pay rent:

(i) "Distrain" For Arrears Of Rent

The landlord can physically take any chattels on the premises belonging to the tenant and, upon notice to the tenant, may sell these after 5 days (two independent appraisals must first be obtained). This procedure is known as "distraint". The sale proceeds (after costs are paid) may then be applied to the rental arrears.

The landlord has to be careful as to how it carries out a distraint. The right to distrain arises and is maintained through the lease and so the landlord has to distrain in such a way as to keep the lease alive and not terminate it. The problem landlords often run into is that they distrain in such a way as to interfere with the tenant’s right to use and enjoy the premises: that has the effect of terminating the lease. If the lease is terminated in this way and the landlord carries on with distraint, the landlord’s actions are illegal.

It is necessary, therefore, to carry out the distraint in a way so as not to interfere with the tenant’s right to use and enjoy the premises. The safest way to distrain is to physically take and remove the chattels. Sometimes, however, physical removal is not practical and so the law allows for "constructive" distraint whereby the landlord can change the locks as long as the appropriate notice is posted and given to the tenant. The notice must advise the tenant that the locks have been changed only to secure the chattels that are going to be sold and the tenant can continue to use the premises under the landlord’s supervision as long as he doesn’t use or take the chattels being distrained.

It is also important to remember that the landlord should not "over distrain" - i.e., the landlord should not seize and sell chattels worth more than the rental arrears and costs of distraint.

Performance Of Lease, And Sue For Arrears As They Accrue

The landlord can refuse to accept the tenant’s fundamental breach of the lease and insist on performance of the terms of the Lease and sue for arrears of rent owing and as they accrue.

For Tenant, And Sue For Arrears And Difference In Rent

The landlord can re-enter the leased premises in order to re-let the premises as the tenant’s agent, and then sue for any arrears of rent owing up to the time the premises are re-let plus the difference between the monthly amount of rent the tenant was paying and the monthly amount the new tenant pays.

For Arrears

Once the rent is in arrears by at least 15 days, the landlord can accept the tenant’s repudiation of the lease arising from the fundamental breach, terminate the lease, and sue for the arrears of rent owing up to that time.

For Arrears And Loss Of Future Rent

Once the rent is in arrears by at least 15 days, the landlord can accept the tenant’s repudiation of the lease arising from the fundamental breach and terminate the lease with notice to the tenant that the tenant will be held liable for the rental arrears and the loss of future rent and other damages. The landlord may then sue the tenant for the arrears and loss of future rent and any damages. The landlord does have a duty to use reasonable efforts to mitigate its loss by attempting to re-let the premises and, if a new tenant is found, the former tenant has to be given a credit for any rent recovered.