What to do when a commercial tenant has abandoned your property?

Finding out that your commercial tenant has abandoned your property is not something that happens every day, and it is a very different situation compared to a clear-cut eviction or mutual surrender. So, what do you do if you haven’t received rent and your calls go straight to voicemail?

As a commercial landlord, your first instinct might be to change the locks yourself and find another commercial tenant, but acting on impulse is the last thing that you should do. If you don’t follow the correct procedures, you risk a claim for wrongful forfeiture (and potentially an injunction/damages), especially if you re-enter without following the lease and correct procedure. Here, we’ll take a look at the step-by-step process on how to manage the abandonment of your commercial premises by a tenant. 

Steps to take when a commercial tenant has abandoned the property

Here’s what you need to do when a commercial tenant has abandoned the property: 

Gathering evidence of abandonment

The first step to take in the process is to gather evidence before taking legal action. You’ll need to establish a reasonable belief that the tenant has actually abandoned the property. 

Here’s what you need to  document to be able to build a defensible case: 

• Physical signs: Are there piles of unopened mail? Or has the electricity or water been disconnected?
• Witness accounts: Ask any neighbours or centre management if they have seen the tenant move furniture out of hours. 
• Operational checks: Has the retail unit been closed during trading hours?
• Rent arrears: This alone does not mean that the commercial tenant has abandoned your property, but combined with a lack of communication is a strong indication of this. 

Forfeiture vs. abandonment

There is no single Abandonment Act. Instead, you’ll have to rely on the right of forfeiture, which is your contractual right to end the lease early due to the tenant having breached the terms. This is usually not paying rent. 

Peaceable re-entry

If the lease has a forfeiture clause, you may be able to exercise peaceable re-entry, which means that you can physically re-enter the property and change the locks. 

• Warning: You won’t be able to enter the property if anyone is present and doesn’t allow you entry. You’ll need to warn the tenant without threatening them. 
• Timing: This should be done in the early hours of the morning or late evening when the property is empty. 
• The risk: Tenants will be able to apply to the court for relief from forfeiture for up to 6 months after you re-enter the property, and if they can pay the outstanding rent, a judge will have to reinstate them and order you to pay their legal costs. 

The abandonment notice

If you are unsure whether or not the commercial tenant has abandoned the property,  you’ll be able to fix an Abandonment Notice to the front door, which states that you believe the premises are abandoned and that you intend to re-enter on a specific date. If the tenant contacts you first, however, you’ll be able to take the notice down. This way, you’ll make sure that you’re taking steps in a transparent manner. 

Dealing with leftover assets (The Torts Act)

Once the commercial tenant has abandoned the property, you’ll need to figure out what to do with the items left behind. This can include office furniture,  retail stock, or industrial machinery, and it cannot simply be thrown away. 

Under the Torts (Interference with Goods) Act 1977, you have a legal duty to take care of the goods and follow a specific procedure before getting rid of them. Here are the steps that need to be taken: 

1. Inventory: Take a photographic inventory of every item in the unit. 
2. The Schedule 1 Notice: You’ll need to serve a notice on the tenant stating that the items are ready for collection and provide them with a deadline. This is usually 14-21 days. 
3. Storage: You are allowed to move the goods to a secure storage facility, but you will need to inform the tenant where they are being stored. 
4. Sale or disposal: Only once the notice period has expired will you be able to sell or dispose of the items. Any proceeds from the sale (excluding sales and storage costs) belong to the tenant and will need to be kept secure for them. 

Mitigating financial loss with the abandonment of premises by a tenant

Once you have been able to repossess the property, you’ll have a duty to make reasonable efforts to find a new tenant. 

Pursuing the debt

Repossession of the property doesn’t mean that the tenant’s debt has been wiped clean. You’ll still be able to pursue them for: 

• Rent arrears
• Damages to the property
• Costs associated with the forfeiture and re-letting

Guarantors and Section 17 notices

If there is a guarantor on the lease, or an Authorised Guarantee Agreement (AGA) from a previous tenant, you’ll be able to pursue them for the debt. Under the Landlord and Tenant (Covenants) Act 1995, you must serve a Section 17 Notice within six months of the rent becoming due. You won’t be able to claim the rent arrears from the guarantor if you miss this window. 

It is always best to make sure that you follow the correct procedures when a commercial tenant has abandoned your property. This includes handling their goods with care and serving the correct notices. This is the quickest way to get the commercial property back to a fully functioning unit. 

Are you looking for commercial landlord insurance? At CIA Landlords, we have the knowledge you require to find a quote that is best suited to your needs. Feel free to visit our advice centre for more information on how to manage your commercial property. Otherwise, make sure to get in touch with our team at CIA Landlord Insurance on 01788 818 670.