Landlords beware

As the credit crunch enters its next phase and the recession begins to bite, landlords are likely to find an increasing number of their occupational tenants getting into fi nancial diffi culties. The nature of these diffi culties and/or the manner in which they can be resolved will have an impact upon and be affected by the terms of any banking documents into which the landlord entered in order to finance its purchase of the property.

Delayed or non-payment of rent
The clearest sign of a tenant’s financial difficulties is the non-payment or delayed payment of rent. At its extreme, this could result in the landlord being unable to service its debt, thereby entitling the bank to accelerate the loan and enforce its security over the property. In practice, in relation to multi-let properties, unless a large tenant or several smaller tenants have failed to pay their rent, the landlord will usually have suffi cient income from its remaining tenants to service its debt.