Distress not an option for commercial landlords19 Feb 2014
One of the most effective options available to landlords of commercial property in the event of non payment of rent has been distress. This longstanding common law right allows landlords to enter premises once rent has become due and seize a tenant’s goods to the value of the rent owed. Whilst this right is an effective and cheap way for landlords to recover arrears, there have historically been concerns that it places too much power in the hands of landlords.
Steps have been slowly introduced paving the way for a statutory scheme to replace distress, and effective from the 6th April 2014 distress will be abolished. Commercial landlords will alternatively have recourse to a statutory remedy- the Commercial Rent Arrears Recovery scheme.
- CRAR is only available to commercial landlords of written leases where no part of the demised premises is let residentially.
- CRAR is only available in respect of rent plus VAT and interest thereon. Any other sums including service charge and insurance are excluded even if reserved as rents in the lease.
- The landlord must give the tenant seven days notice before entering the premises pursuant to CRAR. This is significant as previously, the landlord could enter the premises upon rent falling due. The landlord can apply to the Court for the notice period to be curtailed if it is believed that goods will be removed from the premises to prevent them being seized.
- Agents who exercise CRAR must be certified and may only seize goods belonging to the tenant and not third parties.
- The agent must wait seven clear days before selling any seized goods and give seven clear days notice of sale to the tenant unless the goods would diminish in value or become unsellable.