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Changes To Recovery Of Commercial Rent Arrears

by Ridley&Hall in John Royle, News posted May 9, 2014.

Changes to the way landlords can recover commercial rent arrears are due to come into effect on the 6 April.

Distress or distraint has been around since the Magna Carta. It is a method by which a landlord can recover rent arrears quickly and without going to court, simply by seizing and selling the tenant’s goods, without warning, using a certificated bailiff. Now it is being abolished.

The new procedure known as Commercial Rent Arrears Recovery (CRAR) will have to be followed by landlords wishing to seize and sell assets to cover outstanding rent. Key points to note are:

• there must be a written lease
• it only applies to commercial premises – not where there is lawful, residential use of the whole or part
• it only applies to rent, VAT and interest – it does not apply to service charges or insurance
• the landlord must give at least 7 clear days’ notice in writing (not counting Sundays or bank holidays) before taking action
• there must be a minimum of 7 days’ rent outstanding both at the time of the notice and the entry
• the enforcement agent (previously the bailiff) can only take control of goods belonging to the tenant, not, goods belonging to third parties. Goods which the tenant needs for personal use, in connection with employment, trade or education, are exempt up to a value of £1350
• the landlord has to give the tenant at least 7 days notice before selling the goods.

Where the property has been sub-let, the landlord can choose instead to have the sub-tenant pay rent directly to him.

The requirement to give notice is, possibly, the most significant part of the new CRAR rules. There will be a fear that it gives the tenant an opportunity to remove goods from the premises and frustrate the landlord. However, the new procedure does mean at least the knock at the door will not be out of the blue.

For further information contact John Royle or Julie Devenport members of the Ridley & Hall Commercial Property Team on 01484 538421.

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