Behind on commercial rent: protecting your premises before the landlord acts

For a café, a salon, a workshop or a clinic, the premises is the business. Customers know where to find you, the fit-out is bolted to the floor, and moving would cost more than the arrears ever could. That’s why rent arrears deserve a place near the top of the list, even though a landlord’s letter may look less alarming than one from the ATO.

How do commercial rent arrears usually escalate?

The process depends on your lease and on the leasing legislation in your state or territory. Retail shop leases generally have stronger tenant protections than other commercial leases. But the broad pattern is similar:

Stage	What typically happens
Rent unpaid	Reminder from the landlord or agent
Arrears build	Formal letter or breach notice setting out what’s owed and a date to fix it
Remedy period passes	Landlord may terminate the lease, re-enter the premises or draw on the security
After termination	Landlord may pursue unpaid rent and losses, including under a personal guarantee

Because the rules and notice periods differ, read your lease and any notice carefully. If a formal notice has arrived, enter the date and the number of days it gives into our debt letter triage tool under “default or breach notice” to see your deadline.

What should I say to my landlord?

Talk early, and put it in writing. A good proposal includes:

• An acknowledgement of the arrears and what caused them.
• A commitment to keep current rent paid from now on.
• A specific plan for the arrears — a lump sum on a date, or instalments over a short period.
• Anything that shows the business is viable — a new contract, improved trading, a seasonal upswing.

Landlords usually prefer a tenant who pays to an empty shop and a re-letting campaign. A clear plan gives them a reason to hold off.

What about bank guarantees and personal guarantees?

Two features of most commercial leases can make arrears bite harder:

• Bank guarantee or bond. The landlord may be able to draw on it for unpaid rent, and the lease usually requires you to top it back up. That’s two cash demands for the price of one debt.
• Personal guarantee. Directors often guarantee the company’s lease. If so, the landlord may pursue you personally for arrears and losses if the company can’t pay.

If you’d like to clear the arrears before either of those comes into play, a short enquiry will get a person looking at your options. There’s no credit check when you enquire.

Which funding routes clear rent arrears?

• Unsecured or cash-flow funding, generally between $5,000 and $500,000, set by the business’s turnover and account history, for trading businesses. It’s the most common fit for arrears alone. See unsecured rescue funding.
• Property-secured loans from $20,000 to $5,000,000, where the rent is one of several pressures and there’s equity in a home or investment property.
• A consolidation that clears rent, supplier arrears and ATO balances together, covered on our debt consolidation page.

A lender will look at whether the business can meet current rent and the new repayments. If trading has recovered, that’s usually straightforward to show.

An illustrative example

Illustrative only. An Adelaide physiotherapy clinic falls three months behind on rent after a practitioner leaves and bookings drop. The landlord’s agent issues a breach notice. The owner replies within days with a plan: current rent paid on time, and the arrears cleared in full within three weeks. She arranges an unsecured facility sized on the clinic’s turnover, pays the arrears, and the landlord withdraws the notice. A new practitioner starts the following month.

Is rent really more urgent than my other debts?

Often, yes, because losing the premises can end the business outright. But deadlines matter too. A director penalty notice or statutory demand has a legal clock that’s usually shorter and less forgiving. The which-debt-first sorter ranks rent alongside your other pressures so you can see the order. Our guide on whether to sell assets or borrow to clear debt may also help if you’re weighing up options.

What if I’m thinking of leaving the premises anyway?

Sometimes rent arrears are a sign the location no longer works. If so, be careful. Walking away from a lease doesn’t necessarily end your obligations: the landlord may still claim rent and losses for the remaining term, subject to the lease and the law, and a personal guarantee may make that claim yours.

A more controlled path is to talk to the landlord about an agreed exit, assignment or sublease, while keeping current rent paid. Clearing the arrears first usually improves the landlord’s willingness to negotiate, because you’re no longer asking for two favours at once.

If you’re weighing up whether to stay, move or sell assets, our guide to selling assets or borrowing to clear debt sets out the trade-offs, and a quick look at the which-debt-first sorter will show where rent sits in your list.

Could funding keep your doors open?

Your location, your fit-out and your regulars took years to build. Clearing rent arrears so you can keep them is one of the most straightforward remedies a business can use.

Enquiring takes about 60 seconds, and there’s no credit check when you do. We don’t pass your details to a stack of lenders. A real person reads your enquiry, looks at the arrears and your turnover, and calls you. Please be accurate about the amount owed, any notice dates and your recent trading, so we can recommend the right option first time.

Ask about clearing your rent arrears →