Landlord’s on the back-foot, following changes to Distraint Rules

The BBC’s breakfast time series “The Sheriffs are Coming” will certainly need to take into account, new legislative changes to the enforcement of rent arrears. Following recent changes, the landlord’s ancient right of distress against his tenant to recover arrears of rent has been abolished. For commercial premises only, it will be replaced by a new statutory regime for Commercial Rent Arrears Recovery (“CRAR”). The following significant changes are included in the new reforms:-

  • Whilst under the old law of distraint, “certificated bailiffs” could seize goods without any notice, under CRAR 7 clear days’ notice now has to be given to the tenant before the “enforcement agent” can take control of goods.
  • Under the new regime, distraint can only be carried out, if rent is at least 7 days in arrears, when previously only 1 day was sufficient.
  • The landlord must now give 7 clear days’ notice, not including Sundays or bank holidays. Under the old law of distraint one did not need to give any notice.
  • CRAR only applies to outstanding rent, VAT and interest due under leases in writing and does not extend to service charges, rates and insurance.
  • The tenant can now apply to have the Notice set aside or apply for an order to stay enforcement, where previously, no such right existed.
  • Sub-tenants were previously compelled to pay the landlord directly, whilst under CRAR 14 days’ notice must be given to them.

These changes certainly have benefited the tenant’s position, by allowing a period of grace, if they are experiencing cash flow problems. Other options for landlords, would be to use the County Court Judgement process in order to enforce the liability, especially if services charges, rates and insurance are also outstanding.

Certainly, from an insolvency perspective, it will allow Insolvency Practitioners more time to consider alternatives and pre-emptive action, if one is advising the company that has fallen in arrears.

If you are either a tenant and cannot pay your outstanding rent arrears, or perhaps a landlord and need advice in relation the impact of CRAR and enforcement, perhaps it would be advisable to take professional advice and contact AABRS to discuss in more details. Please phone Simon Renshaw on 020 8444 2000 or email sr@aabrs.com.