Legal Matters with Howlett Clarke

Introduction of new commercial rent arrears recovery scheme

By Tony Newey, commercial law specialist with QS Howlett Clarke.

Since time immemorial (well at least the Distress for Rent Act 1737) one method of recovering rent arrears has been to levy “distress” on the goods of the tenant.  The landlord’s remedy of “distress for rent” theoretically applied to both residential and commercial property.

However, statutory protections in respect of residential property brought in over many years, meant that the remedy in respect of residential property became, to all intents and purposes, irrelevant.

That was not the case in respect of commercial property and until recently, commercial landlords were able to instruct bailiffs to go in to commercial premises to levy distress against the tenant’s goods and, eventually, sell them to recover the rent arrears.

As from the 6 April 2014, the old remedy of distress for rent has been replaced by new regulations referred to as Commercial Rent Arrears Recovery (CRAR) which changes everything.

Put very simply, the rules now require that before entering premises to take possession of tenant’s goods, a landlord first has to give a minimum notice period of seven days and that notice must contain information prescribed in regulations.

I cannot go into the detail of the new regulations and procedures here but suffice to say that with the non-paying tenant now entitled to at least seven days’ notice, the fact is that, in many cases, the chances of finding goods on the premises worth taking possession of at the end of that period of notice, are somewhat reduced.

The effect will be not only a reduction in work for bailiffs (who can probably look after themselves) but the need for landlords to be much more rigorous in assessing potential tenants.  We might therefore expect to see an increased use of additional security such as the taking of substantial rent deposits and personal guarantees.

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