Distress to be Abolished!
I have previously written articles regarding the intended abolition of the ancient method of recovering rent known as distress for rent. This is the long established method for the recovery of rent by commercial landlords and is a handy tool for landlords to recover rent arrears without the need to bring the lease to an end, issue court proceedings or join a potentially long list of creditors.
Following several reviews and consultations on this process which began back in 1998, Part 3 of the Tribunals Courts and Enforcements Act 2007 will now implement the new procedure replacing distress. This is known as Commercial Rent Arrears Recovery ("CRAR") and will be brought into force in April 2014.
Commercial Landlords should note that, whilst we are still several months away from the implementation of the new regime, leases are being granted now which will still be in place when CRAR comes into force. Below is a summary of the key points arising from CRAR:
- Firstly, the new regime only applies to written tenancies and only where the lease does not permit the property for use as a dwelling. If the property is allowed for use as a dwelling then CRAR does not apply, but if the property is being used as a dwelling in breach of the lease then CRAR will apply.
- A bailiff will be referred to as an "enforcement officer", the terms "distress" and "distraint" will be replaced with "taking control of goods" and a "walking possession agreement" will become a "controlled goods agreement"
- There must be a minimum period of 7 days rent arrears before CRAR can be applied.
- Landlords will be required to give written notice of at least 7 days before an enforcement officer can seize goods. This period doesn't include the day the notice was served, Sundays, bank holidays, Good Friday or Christmas day so it is effectively 9 days. After the seizing of goods a clear 7 days notice of sale must be provided to the tenant (again, this is effectively 8 days as the day of service doesn't count). Combined with the original 7 days of arrears this gives a total of at least 24 days before a landlord can seize and sell good to pay for outstanding arrears.
- Goods owned by a third party and those which are essential to the tenant's business cannot be seized.
The CRAR regime seeks to redress the balance of power which for several decades has been perceived to be with the landlord. The requirement of a 7 day notice will certainly be viewed by landlords as a period of time for tenants to simply remove any goods or assets from the property before an enforcement officer can enter. This may well result in landlords utilising other methods of enforcement to recover rent arrears, most notably court proceedings.
Should you have any queries regarding this article then please contact Christopher Harding on 01482 337227. Alternatively, if you are experiencing problems with a commercial tenant, contact Ralph Gilbert, Partner and Head of Rollits' Property Dispute Resolution Group on 01482 323239.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.