Landlords in distress

Until 6 April 2014 it had long been a cornerstone of a commercial landlord’s powers that, in the event of default in payment of rent, a landlord was entitled to re-enter their property and seize their tenants goods held at the property until rent was paid. If payment of rent was not forthcoming, the landlord was entitled to sell the goods and use the sales proceeds to offset against the rent arrears. This remedy was known as “distress”.

Since 6 April 2014, the previous law of distress has been repealed and replaced with a new “Commercial Rent Arrears Recovery” scheme (“CRAR”).

Like distress, CRAR only applies to commercial premises and thus excludes all residential tenancies (unless the residential use of the premises is unlawful). For CRAR to be available as a remedy, the commercial lease must be written.

Similarly, CRAR is only available in relation to rent arrears. It does not include unpaid rates, council tax, insurance, maintenance and so forth. Previously, sums which were described as rent, but were in fact rates, insurance or tax contributions, were subject to distress.

To utilise the CRAR scheme a landlord of commercial premises must be owed rent of at least seven days (i.e. a sum equal to seven days of rent, not that arrears must be unpaid for seven days) and must provide a tenant with seven clear days prior notice before taking control of any goods.

Obviously, this latter requirement may “hamstring” the powers that landlords previously benefit from by removing the element of surprise which was hitherto a hallmark of distress as a remedy.

A similar hurdle for landlords to overcome is that landlords cannot personally enter premises to seize goods. This act must be effected through an agent authorised pursuant to section 63(2) of the Tribunals Courts and Enforcement Act 2007.

Whilst the legislation behind the CRAR scheme has certainly served the purpose of setting down in “black and white” a new process which landlords benefit from, it is evident even at these early stages that the CRAR scheme is more pro-tenant than was the case with distress. The changes highlighted above may prove to hamper a landlord’s progress rather than help as time can only tell.

Certainly, the ancient remedy of distress appears to have had the door well and truly closed in its face.

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