Abolition of Law of Distress

Commercial Tenancies

The right of Landlords to enter upon leased property and exercise distress over goods in order to recover the value of rent arrears is about to change.

As the Law currently stands, if a commercial Tenant is in arrears of rent and other sums due under a lease, the Landlord or a certified Bailiff has a right to enter upon the leased Property and seize and sell goods up to the value of the arrears.

The Commercial Rent Arrears Recovery Scheme (CRAR) is due to come into force from 6 April 2014, and will see the abolition of the right of a Landlord to “distress for rent”, and replace it instead with a new CRAR procedure.

The new CRAR procedure can be used to recover rent arrears and interest, and any VAT chargeable, but does not include any monies due as insurance, maintenance or service charges etc., even if described as “rents” in the Lease. Landlords should therefore take care to keep these charges listed separately from the rent in the Lease provisions.  There must be a written lease in existence to use the CRAR scheme, and any lease provisions attempting to amend the CRAR provisions or prevent them from having effect shall be deemed void.

CRAR cannot be used by the Landlord until the Tenant is in arrears of the minimum “net unpaid rent” which is an amount equal to or greater than 7 days rent with any VAT, interest or set-off deducted.  Landlords will be required to serve a Notice of enforcement giving 7 days’ notice before entering the premises, although shorter notice can be given with leave of the court if the Landlord has reason to believe the Tenant will remove goods. The net unpaid rent must still be at least at this 7 day level immediately before the Notice is served, and immediately before any goods are seized. The Tenant has the right to apply to the court for a set aside or delay of execution once the Notice has been served on them.

Only certified bailiffs will be able to enter premises and seize goods, no longer the Landlords themselves.

If you would like any more information on Landlord and Tenant issues, please contact us.

Jacqueline Penfold
Jacqueline Penfold
Tina Ripley
Tina Ripley