Sitting tenants: the art of negotiation is crucial

26th May 2021


Sitting tenants can be a nightmare for commercial landlords.  Sometimes referred to as Regulated Tenants, Tenants Holding Over or Unauthorised Tenants, they are relatively common, although the majority of landlords simply do nothing about them as long as they continue to pay rent.  It is, however, a real issue as it has a detrimental impact on the property’s investment value.

As it stands, due to current Covid laws, you can’t forfeit leases for non-payment of rent, although you can for other material breaches.

Assigning or sub-letting a lease without the landlord’s consent and without the correct Licence to Assign or Licence to Underlet is one such breach.   If no such licence is in place, then you have an authorised tenancy – which can be dangerous.  This scenario is often down to poor property management, as we saw recently on an instruction by a national corporate which left the landlord in a dire situation.

So, what should a landlord do if they find themselves left with this dilemma? The key thing is not to accept payment of rent from the unauthorised tenant. If you do, then it creates a landlord and tenant relationship in its own right.

We’d urge any landlords to follow these steps:

– Don’t be afraid to serve a Section 146 Notice, which puts the sitting tenant on notice that you plan to evict them.

– Remember, tenants have rights, but so do landlords. As long as the landlord has not accepted payment of rent, they remain in a strong position to get their property back.

– Use a pro-active but entrepreneurial surveyor and a good solicitor.

– Clearly, the last thing a landlord wants is an empty property, so evicting a tenant can be daunting, but you must use a knowledgeable and confident commercial agent who knows the local market.

It may be that your property is significantly under-rented anyway, which we frequently find to be the case in these situations. In this case, getting the tenant out isn’t a bad thing, as it’s likely the money you invest into the fees and costs of litigation can be paid back multiple times over with the added value of an increase in rent and an increase in the overall value of the asset.

Next, you need a robust strategy that includes strong, straight-forward negotiation and frequent communication. Hire a good property lawyer – having the right professionals on board can save you a lot of hassle and, in the long-term, money.

Having a sitting tenant has a negative impact on the property’s investment value, so check all your leases and make sure they are in date and the right tenant is in occupation. Quite often, we see that businesses take leases out in one name – only for someone completely different to be trading from the premises.

Finally, and most importantly, never approach these situations with a one-size-fits-all mentality; there is no such thing. Each case, each situation, the parties, the circumstances and the desired outcome are all different; so it’s important that you have a clear objective of the outcome you want to achieve and then set your stall out accordingly.

For more information or to arrange a chat with our management property team, contact James McArthur or Jude Weston.

The art of negotiation has never been more important in property management than over the last 12 months.

Since the start of the Covid-19 pandemic, we’ve encountered a wide variety of issues for our landlord clients, some of which we’ve inherited when taking over portfolios from badly managed properties. 

Sitting tenants can be a nightmare for commercial landlords.  Sometimes referred to as Regulated Tenants, Tenants Holding Over or Unauthorised Tenants, they are relatively common, although the majority of landlords simply do nothing about them as long as they continue to pay rent.  It is, however, a real issue as it has a detrimental impact on the property’s investment value.

As it stands, due to current Covid laws, you can’t forfeit leases for non-payment of rent, although you can for other material breaches.

Assigning or sub-letting a lease without the landlord’s consent and without the correct Licence to Assign or Licence to Underlet is one such breach.   If no such licence is in place, then you have an authorised tenancy – which can be dangerous.  This scenario is often down to poor property management, as we saw recently on an instruction by a national corporate which left the landlord in a dire situation.

So, what should a landlord do if they find themselves left with this dilemma? The key thing is not to accept payment of rent from the unauthorised tenant. If you do, then it creates a landlord and tenant relationship in its own right.

We’d urge any landlords to follow these steps:

– Don’t be afraid to serve a Section 146 Notice, which puts the sitting tenant on notice that you plan to evict them.

– Remember, tenants have rights, but so do landlords. As long as the landlord has not accepted payment of rent, they remain in a strong position to get their property back.

– Use a pro-active but entrepreneurial surveyor and a good solicitor.

– Clearly, the last thing a landlord wants is an empty property, so evicting a tenant can be daunting, but you must use a knowledgeable and confident commercial agent who knows the local market.

It may be that your property is significantly under-rented anyway, which we frequently find to be the case in these situations. In this case, getting the tenant out isn’t a bad thing, as it’s likely the money you invest into the fees and costs of litigation can be paid back multiple times over with the added value of an increase in rent and an increase in the overall value of the asset.

Next, you need a robust strategy that includes strong, straight-forward negotiation and frequent communication. Hire a good property lawyer – having the right professionals on board can save you a lot of hassle and, in the long-term, money.

Having a sitting tenant has a negative impact on the property’s investment value, so check all your leases and make sure they are in date and the right tenant is in occupation. Quite often, we see that businesses take leases out in one name – only for someone completely different to be trading from the premises.

Finally, and most importantly, never approach these situations with a one-size-fits-all mentality; there is no such thing. Each case, each situation, the parties, the circumstances and the desired outcome are all different; so it’s important that you have a clear objective of the outcome you want to achieve and then set your stall out accordingly.

For more information or to arrange a chat with our management property team, contact James McArthur or Jude Weston.


To find out more, feel free to contact us, give us a call on 0115 958 8599 or email [email protected].