It is important for Landlords to spot the warning signs when a commercial tenant is facing financial difficulties to help them minimise their losses. Tenants are often reluctant to let their landlord know if there are issues, but there are some common signs which might indicate a problem.

Paying rent late

The most obvious sign for a landlord that their tenant is in financial trouble is paying rent late or falling into arrears when they have previously always been prompt with payment. As we enter a recession, it will be vital for landlords to keep an eye on arrears and devise strategies for recovery.

Requesting changes to payment schedule and concession agreements

If your tenant suddenly requests to change their agreed payment schedule e.g., from monthly to quarterly, it could be a sign of financial hardship. Adding to this any requests for rent concession agreements i.e., rent reductions are a good indictor your tenant is struggling to pay rent. If you are willing to grant a concession, it is important to monitor the expiry of these arrangements to maximise rental income.

Requests to sublet

This could be a sign that your commercial tenant’s business is downsizing or that they are struggling to make payments. It is important for landlords to fully ascertain the reasons behind any requests to sublet. Additionally look out for any indication that your tenant has been making redundancies, this could be a sign the business is struggling, and your rental income could be affected.

Third parties paying the rent

This could be a sign that your tenant is facing cash flow issues. it may also be an indication that the tenant has let a third party occupy the premises without permission. If you suspect this is the case, an onsite visit may be a necessary cause of action to establish who is in occupation of your property.

Why it is important for Landlords to keep an eye on the financial well-being of the tenant

Put simply, landlords want to ensure that they will be paid the rent they are owed when they let out a property. Monitoring the financial activity of a tenant puts safeguards in place against the landlord’s investment. It is also important to remember that a landlord may be under an obligation to monitor the activities of their tenants due to covenants imposed by their lender.

If you are concerned that your tenant may be in financial difficulty and want to assess your options, please contact Nick Morrison by email or on 01494 521301.