Commercial Rent Arrears Recovery – Distraint No More
The self help remedy of distraint, often used by commercial landlords will come to an end on 6 April 2014.
Distraint will be replaced by the Commercial Rent Arrears Recovery (CRAR) regime which will give commercial landlords a right to recover arrears using the prescribed enforcement procedure.
There is no question that the new regime is more restrictive and almost certainly will not be popular with landlords.
The key changes are as follows: –
- A landlord will now have to serve at least a 7 day notice on a tenant before the goods can be seized. There is an exception where a landlord makes an Application to the Court for a lesser notice period.
- The CRAR will apply only to commercial premises. If the premises are of mixed use, then it cannot be applied.
- CRAR applies only to tenancies evidenced in writing and not to licences to occupy.
- A landlord can only recover actual rent. Costs which are not rent but might have been reserved as rent will not be included. Common examples are service charges, rates and insurance. All of these are excluded.
- The arrears of rent must exceed a minimum of 7 days rent.
Landlords also need to bear in mind additional notices are required. A 7 day notice must be provided before a sale can commence and the enforcement agent must also provide notice where he seeks to re-enter the premises having previously seized but not removed goods.
A landlord will have to use “an enforcement agent” to take control of goods to recover rent. Previously the landlord would be entitled under distraint to attend themselves or use an agent.
The new regulations allow for enforcement to proceed on any day of the week between 6.00 a.m. to 9.00 p.m. Where the normal operating hours of the tenant business are not between these periods, the normal operating hours of that business.
Overall, the new regime is likely to be less flexible and more costly in terms of time and administration. From a landlord’s point of view clearly the new procedure is inferior to its predecessor, but, from 6 April 2014, this is the regime which the landlords need to use.