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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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Commercial tenant question: I was a tenant in a commercial

Resolved Question:

Commercial tenant question:
I was a tenant in a commercial property for ten years and left last year. I can't recall ever having signed a lease agreement. I owe back rent of 10K and the landlord now wants to charge interest adding an extra 7k. I was willing to pay the 10K in instalments but think I am being overcharged in interest. Can I ask for a copy of the lease agreement (if one exists) Any advice would be welcome.
Submitted: 3 years ago.
Category: Law
Expert:  Joshua replied 3 years ago.

Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

may I ask what evidence the landlord has that the rent is owed in the absence of a lease please? For example, presumably who have evidence of previous rent payments to demonstrate the level of rent agreed between you can he prove when you did or did not move out of the Premises?

Customer:

Yes, there is a full list of dates of when the rent was due and paid or not which goes back to 2002. It was a mutual agreement that I vacate the premises at the end of Dec 2012. The relationship between myself and the landlord has always been amicable.

Joshua :

thank you. From what you say, I presume I'm correct to understand that the landlord would have persuasive evidence as to exactly when you left is from what you say you reached an agreement in this respect. Am I correct in this presumption?

Customer:

Yes. We both agreed and signed a document dated 31st Dec 2012 regarding the termination of "the lease" (verbal?) and the fact that I agreed to pay the amount of rent outsatnding at that time £11.549.71. There was no mention of any interest or compensation. I have only been able to reduce that amount to £10, 449 due to difficult finances.

Customer:

His lawyers have sent me a letter asking for the rent arrears which I have always fully intended to pay but now they have added £7,006 in interest and £1,950 in compensation.

Joshua :

thank you

Joshua :

because you have no formal lease, you will have no formal agreement as to interest that can be charged by the landlord on unpaid rents. Accordingly, the landlord seek to fall back upon statutory interest provision has provided by the Late Payment of Commercial Debts (Interest) Act 1998.

Joshua :

this legislation entitles the landlord to charge interest at 8% above base rate on unpaid commercial debts which would include rent. Given the base rate is presently 0.5%, this would entitle the landlord to charge interest at 8.5% per annum the landlord is attempting to charge more than this, such demands would on the face of it appear unlawful however fortunately the would be a basis for the landlord to seek the above statutory interest on such late rent that he can demonstrate is owed

Joshua :

is there anything above I can clarify for you?

Customer:

So are you saying that you think he would be justified in charging this amount?

Joshua :

The amount he appears to be claiming seems very high. When should the rent have been paid?

Customer:

The rent should have been paid monthly. The rate was set at £375pm, when I realised I had fallen behind with some months I agreed to pay £425 per month to catch up, this happened for some time but it was difficult to maintain.

Customer:

I have a spreadsheet with all the figures.

Joshua :

If you can just give me the rough dates which have been unpaid - e.g. May 2011-December 2013 for example

Customer:

Well actually they were intermittent, there was never a long period when I paid nothing.

Joshua :

This is just for rough purposes - over what period have you sometimes not paid rent?

Customer:

At the start fro 2002 there were very few payments missed. July to Dec 05 rent was missed but then in Jan 06 I paid £2500

Joshua :

I see. This goes back a very long way. This is going to be difficult to give you an estimate on without going through the figures in detail. If you have a spread sheet, for each payment the missed the landlord is entitled to claim interest at 8% above base rate per year for each year the rent has been unpaid. You can therefore work out the interest due for each missed payment on a spreadsheet and total up the amount. The landlord in fact must do this if he wishes to claim interest. The rates change over time due to base rate fluctuations which adds a further calculation that needs to be considered.

Joshua :

However I do have some good news.

Joshua :

If you have not promised to pay or made payments towards rent older than 6 years the landlord cannot claim rent older than 6 years by virtue of the Limitation Act.

Joshua :

Accordingly you may consider denying liability for any unpaid rent older than 6 years and advising that you will consider claims for rent less than 6 years old. On such rent the landlord is limited to statutory interest. There is a table showing the interest he can claim over time here:
http://payontime.co.uk/late-payment-legislation-interest-calculators

Customer:

Well that would be good news but I am guessing that by agreeing to and signing the document for the outstanding rent of £11k I admitted liability to all of the arrears.

Joshua :

This has been done already and sent?

Customer:

I was referring to the document that I mentioned earlier that we bot signed on 31st Dec 2012.

Joshua :

Damn - that would amount to "resetting the six year clock" unfortunately. this document would mean that the landlord has a further six years from 31 December 2012 in which to claim such old rents I regret.

Joshua :

You wish to ensure that the landlord is limiting his interest claims to the statutory interest charge under the above legislation as above. you pay rent as a limited company then his claim would be against your limited company rather than you unless you have admitted otherwise a further letter you have signed. Otherwise, if you have paid rent or otherwise admitted liability personally, the landlord would have a claim against you for the unpaid rent together with statutory interest I fear

Customer:

Yes I guessed as much. I must make it clear, I never intended to not pay any outstanding payments, it would have been difficult for me but I know my obligations. It's the extra £8+ in interest that I am trying to avoid.

Customer:

If I have to pay some interest, say £1k (10%) then so be it.

Customer:

If however, the lease had been null and void then I would have looked at things differenty

Joshua :

you may consider negotiating with the landlord a settlement figure. Just because the landlord has a right to charge statutory interest does not mean that it may not be more beneficial for him to agree a lower settlement figure with you pay voluntarily what is agreed between you. From the landlord's point of view, unless he knows your financial circumstances, you would to claim you have insufficient funds to pay, no amount of rights on the part of the landlord will help him to actually get any money from you. accordingly, he may be prepared to accept a lower figure waive some of these rights in respect of interest in return for the voluntary offer of payment

Joshua :

Is there anything else I can help you with?

Customer:

Yes, I had considered writing a letter of offer and sending a copy both to him personally and to his solicitor. I would make him an offer of say £200 pm which I thought should include the arrears and perhaps a percentage towards interest, maybe £1k, what do you think?

Joshua :

That is a perfectly reasonable initial offer. Consider heading the offer "Without Prejudice Save as to Costs". This prevents the letter resetting the 6 year clock again

Customer:

And does using "Without Prejudice Save as to costs" also mean that any offer I make in the letter cannot be used in court if it went that far?

Joshua :

Exactly it cannot be taken into evidence until judgement has been made. At that point if they fail to achieve more than you offer you can produce the letter and use it to ensure that the costs of the claim are awarded against them even if they are successful.

Customer:

and one last thing, am I right in thinking that any claim over and above £10k cant be dealt with in the small claims court?

Joshua :

Correct - it would be head in the fast track of the county court where some limited legal fees can be recovered.

Joshua :

Does the above answer all your questions or is there anything I can clarify or help with any further?

Customer:

I think you have been very helpful, my plan is to make them an offer based on our discussion, the outstanding amount and £1k towards interest and costs. I will send a copy both to the solicitor and to the landlord with perhaps a personal covering letter (one that perhaps gives us the opportunity to come to an agreement without incurring further costs)

Joshua :

I am glad to have been able to assist. If I can assist any further as the situation develops please do no hesitate to let me know.

Joshua :

If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with though please reply back to me though.

Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
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