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All change for the law of distress

21st March 2014

On 6 April 2014, the law of distress, being a landlord’s ancient legal remedy to seize a tenant’s goods from the premises the subject of the lease for non-payment of rent, will be abolished and replaced with a more tenant-friendly alternative, known as Commercial Rent Arrears Recovery (“CRAR”).

Under the current law and subject to the terms of the lease, distress can be exercised as soon as rent is in arrear and without notice to the tenant, which means that the tenant often has no time to remove their possessions from the property and evade enforcement.  An unexpected visit from the landlord’s bailiff can cause embarrassment to the tenant when it takes place in front of staff and clients.  More often than not, the shock caused by the initial visit from the bailiff is enough to cause the majority of tenants to pay.

The current law of distress can be exercised as soon as rent falls into arrear (unless the lease states otherwise) and used for any unpaid sums under the lease classed as “rent”, which often include service charge, insurance payments and other specified amounts.

The law has been reviewed as it was considered too draconian and unfair on tenants.  Some of the main changes which will come into force under CRAR are:

1. The lease must be in writing, otherwise CRAR cannot be exercised, and it must be a lease of commercial premises.
2. CRAR cannot be used if the arrears do not exceed the minimum amount and currently, this is set at an amount equal to seven days’ rent.
3. Subject to a landlord’s right to apply to court and shorten the period, a landlord must give the tenant at least seven clear days’ notice of its intention to use CRAR prior to its rights being exercised.   The notice must contain certain prescribed information.
4. CRAR can only be exercised for non-payment of the rent, not for other sums such as service charge or insurance.
5. Only an authorised enforcement agent can exercise CRAR.
6. Certain time limits and rules must be followed if and when the tenant’s possessions are to be sold.  Currently, goods may be sold after five days.
7. It will take much longer under CRAR before a tenant’s goods can be sold to pay the rent arrears, assuming of course the landlord’s enforcement agent finds any goods at the premises, bearing in mind that seven days’ notice of the intended exercise of CRAR must first be given to the tenant.
CRAR imposes a new and detailed regime which requires compliance with a comprehensive set of rules and regulations.  It will be welcomed by tenants but not by landlords.  Legal advice should be obtained whether you are considering exercising CRAR or are a tenant whose landlord is enforcing the right.

For further information please contact James Picknell on 01932 590 500 or email james.picknell@mundays.co.uk or another member of the real estate dispute resolution team.

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