What Happens when Your Business Can’t Pay Rent?

6 min read|Last Updated: September 13, 2021|

Possible Effects of Not Paying Business Premise Rent

  • Delaying rent payments gives cashflow relief for struggling businesses and this can ward off. Bankruptcy and retrenchment.
  • You can be sued by your landlord over rental payment and building management fee defaults.
  • It could lead to the landlord opposing lease renewal under the Landlord and Tenant Act.
  • Failure to pay rent (and closure, even though legally required) could lead to the loss of personal concession signed by tents such s reduced rents or turnover-only-rents and result in a sharp increase in rent.
  • A business owner may be forced out of business in the event that the landlord takes the option of eviction, forcing the business owner to relocate or lose their business altogether.
  • Due to the loss of rental revenue, property owners are defaulting on their mortgages. As a result, banks that are already struggling due to COVID-19 are foreced to write down loans and raise capital to cover for their losses.

COVID-19’s And Recession’s Contribution to Business Rental Problems

Coronavirus pandemic and anti-government protests have and are still putting considerable strain on corporate owners who lease premises.

The Covid-19 pandemic many people have been unemployed, leading to lower consumer consumption as people are buying only essentials, and as such, businesses are doing poorly. In turn, business owners are finding it challenging to pay rental fees.

Retail sales have sunk, and the business industry has partially or closed, sending staff home unpaid and without leave benefits.

In the recession, rents both go up and down. It is usually seen by those not affected directly as a great time to buy instead of renting as the ownership process goes down. However, as demand for lower-priced rental places increases resulting in low vacancy, then prices may go up. A recession will adjust the supply/demand curve. It has led to economic distress, and tenants are now unable to pay rental fees on their business premises even when rents were reduced, prompting landlords to seize their deposits.

Retail sales have dropped 37 percent in the first quarter, and a quick rebound is unlikely because the tourism sector has been significantly affected, causing economic depression.

Other Avenues for Financial Assistance When In Financial Crisis

  • Loans.
    A business owner may opt for loans to solve their financial situations and be able to pay business rent. You can even use your logbook as collateral when applying for a loan. Some of the common loans are bank loans and loans for Small and Medium Enterprises (SMEs) usually provided by governments to upcoming or struggling business owners.
  • E-commerce as the way forward.
    A business owner may choose to go digital in its business operations to reach many customers and serve customers best and, in turn, save on rental expenses when in financial strain. Being digital may also help cut some expenses like electricity, air conditioning, and staff reduction.
  • Work-from-home.
    Employers may consider assigning employees to work to accomplish while at home and in such situations, save finances of daily operations like coffee & snack expenses, parking lot fees, transportation refunds. The money saved can go a long way in reducing the rental cost, even to a small extent.
  • Consider factoring.
    This is where a company sells its receivables at a discount to get cash up-front.
  • Credit cards.
    It is a risky business and should be a last resort. However, a credit card can be used responsibly to get you out of the financial problems and, in turn, allows you the opportunity to use the little cash at your disposal to settle rental payments with your landlord.
  • Pledge some of your future earnings.
    An ambitious business owner may offer up a percentage of their future lifetime earnings in exchange for upfront, undesignated venture funding.
  • Do mergers and space sharing.
    Look for avenues in which you can merge your business with another, or lease out that extra space like a spare room or parking lot and have the opportunity to share rental cost.
  • Try crowdfunding.
    This is where you put out your best idea to the scrutiny of the crowd, and if they like your idea, they assist in funding. It is supposed to facilitate the asking or and giving o support for single, one-off ideas. Usually, project-creators offer incentives for pledging to inform of a reward for the support.
  • Use your ‘rainy season’ savings.
    Most businesses, if not all, usually have savings that they intend to use when the going gets tough. And what situation can be tougher than an eminent eviction when you have run out of options and even the deposit has been used up?
  • Temporary deferment of government-related debts.
    As a business owner having rental problems, you can take advantage of the crisis and defer payments like profit tax (but first confirm how the government is likely to react to that) and student loans for a later date.
  • Government relief.
    Find out available government reliefs that can help sort out your rental problems directly or indirectly through relieving you on other expenses whose funds you can then direct to the rental payment.

Government’s Contribution to Alleviating Business Rental Problems

Governments have introduced financing support, tax, and other temporary relief measures intended to help businesses survive the dramatic short term effects of crisis like that of the corona virus, which has hit the whole world.

Some of the government measures include providing financing support in the form of the SME Financing Guarantee Scheme, the Employment Support Scheme, as well as introducing a reduction in profit tax, income tax, property tax, specific industries subsidies among others.

The government also waives off some charges to benefit the business industry.

Working out a payment plan with your landlord

Tenants can seek advice or professionals like lawyers on how to go about rental payment problems and available payment plan possibilities.

You can work out your payment plan with your landlord by renegotiating your leases. Other reasonable landlords may accept this instead of losing out on the rent altogether. It is a win-win situation as your business is also not faring well during the crisis.

Tenants could ask the landlord for monthly rental payments instead of quarterly; for a moratorium on rental payments or 3-6 months; for a reduction in rent, for rent to be permanently or temporarily converted to a turnover-only basis; or that the rent is reduced by 50% to share the pain equally.

The landlord and tenant can strike out a plan to benefit each other by promoting each other’s cause. For example, a landlord can commit to use the products of his/her tenants or direct his customers to the tenant’s business. This helps the tenant not to go out of business. When the business booms, the landlord has his rent in time as arranged.

Landlords can also engage in regular rent reviews with short intervals with the business tenant in order to adjust rental fees with respect to the tenant’s financial situation.

Other rental payment plans may be paid by installments or granting rent-free periods.


Tenants and landlords should work out their payment plans having in mind that rent is one of the major operating costs for retailers, and at the same time, rent is the primary source of income for many landlords.

Force majeure clauses allowing termination, or at least closure, and providing for the cessation of rents should be included in all leases for business premises.

What Happens when Your Business Can’t Pay Rent? FAQs

What bad thing can happen when a business cannot totally pay rent?2020-10-26T06:41:01+00:00
  • You can be sued by the landlord.
  • Your landlord may refuse to renew your lease and you will have to relocate which may lead to temporal or permanent business failure.
  • You can loose business property. The landlord may decide to confiscate your property as payment.
Can a landlord turn down my rent payment plan?2020-12-30T03:31:50+00:00

Business premises are private properties, and the landlord is not obligated to agree with your suggestions if he/she thinks your payment plan doesn’t suit him as. The landlord can turn down your rent payment plan.

Is there a law that intervenes incase of disagreent with my landlord over rent?2020-10-26T06:40:19+00:00

There is a law that governs both the landlord and tenant. You as a tenant can always seek help in the courts of law. 

If I rent a business Premise Can I be evicted?2020-10-26T06:36:28+00:00

Yes. The landlord can evict you if you have rent arrears and the two of you are not able to agree on a payment plan.  

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