Step 3 Dealing with your priority debts

​Priority business debts

Business mortgage

A lender’s powers are different depending on whether you take out a mortgage for your home or for business purposes, such as shop or office premises or a buy-to-let property.

Your mortgage lender may be more demanding if you took the mortgage out for business purposes.

The Law of Property Act 1925 (LPA 1925) applies to most business mortgages (for example, buy-to-let or commercial mortgages).

The Law of Property Act gives your mortgage lender the right to repossess the property or land without a court order. To do this your mortgage lender will need to appoint receivers (known as LPA receivers).

Warning:

getting your property back from the receivers

Even if you clear the debt in full, the receivers do not have to hand the property back to you. They can still put it up for sale. If you feel that the receivers are acting inappropriately, you may need to get legal advice to help you make a complaint. Contact us for advice.

Your mortgage lender can appoint LPA receivers if you fall behind with your mortgage payments. The receivers’ job is to recover the money you owe to the lender. They can do this by collecting the rent direct from the tenant (if this applies), selling the property or both.

Information:

always try to negotiate

Be open and honest with both the receivers and the mortgage lender. If you can show that the property can continue to be rented out to clear the debt rather than it being sold, you may avoid losing the property. Once you have cleared the debt (and paid back the receiver’s fees), the property may be handed back to you.

Business rent

If you do not keep up your rent payments, your landlord can send a bailiff to your business premises to remove your stock and equipment without a court order.

Information:

changing locks and removing goods

Your landlord cannot change the locks on your business premises and remove goods at the same time. If your landlord has done this, they must give you the chance to come back to your business premises and take your goods. Contact us for advice.

It is important to let your landlord know if you are in difficulties and to come to an arrangement to pay off any arrears.

If you cannot make payments, your landlord could also change the locks on your business premises to stop you gaining entry. In some cases, the landlord may have to apply for a court order to evict you.

Any action your landlord takes will depend on your relationship with them and the length of any lease you may have. It is important to negotiate with your landlord as soon as you realise you are in financial difficulties. You can use Your budget to help you do this.

If you stop trading, you may still have to pay rent on your business premises. Check the terms of your lease. You may also have to pay business rates until the term of the lease has ended. Your landlord can still take court action to recover any rent arrears you might owe, even if you have stopped trading.

See our fact sheet:

Business property leases.

If you need more information about negotiating with your landlord, contact us for advice.