Distress or Relief

Commercial tenants have never been in favour of their landlord, or more usually a bailiff, turning up unannounced and seizing their goods in order to recover arrears of rent.  However, they will soon be able to breathe a sigh of relief as the common law remedy of distress is being abolished and replaced by Commercial Rent Arrears Recovery (“CRAR”) from 6 April 2014.  Here, Helen Porter, Head of Warner Goodman Commercial’s Litigation Team, explains forthcoming changes to landlords’ rights to distrain for rent.

The Government has finally published regulations implementing the reforms that were originally proposed in the Tribunal Courts and Enforcement Act 2007.  There has long been criticism of the ancient law of distress which allowed Landlords to take possession of tenants’ valuable goods ahead of other creditors and either hold them pending settlement of the arrears, or sell them in lieu of payment.

This is not such good news for Landlords who must now follow CRAR, which is narrower in scope than the common law, to recover arrears.  Rent will be defined strictly to mean only that which covers “possession and use” of the premises thus excluding other monies often described as rent under the lease such as insurance, service charge and rates.  Mixed commercial and residential premises (eg a lease of a shop with a flat above) will also be excluded so landlords with mixed use properties might consider splitting them into two separate leases.  CRAR will apply to written tenancies at will but not for licences to occupy.

In addition, landlords must give a 7 day minimum notice period of enforcement which, some believe, will provide tenants the opportunity to remove goods, thereby limiting the usefulness of CRAR.  Landlords can apply to the court for a shorter notice period where it is likely that the tenant will remove goods but this will add to the Landlord’s costs.

Commercial landlords will still be able to recover arrears from a sub-tenant by serving a notice requiring rents to be paid direct to the superior landlord under section 6 of the Law of Distress Amendment Act 1908, which is not affected. .

For more information on distress or recovering monies due under a Lease, contact Helen by email on helenporter@warnergoodman.co.uk or by telephone on 023 8071 7425.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.