Many landlords have used the ancient remedy of distress to apply effective pressure on their tenants to pay their rent in a timely fashion. The threat of the bailiffs at the door often persuades a tenant to pay what is due but that remedy is going and we have waited years to see the detail of Commercial Rent Arrears Recovery (CRAR) being the new statutory remedy replacing distress. Finally we have the regulations and they will come into force on 6 April 2014.
The idea behind CRAR was to redress the perceived imbalance between the landlord’s and the tenant’s rights when recovering rent arrears.
Broadly, the changes that will be made to the existing regime are:
- CRAR can only be undertaken by certificated enforcement agents (bailiffs)
- Before the enforcement agent takes control of the tenant’s goods, he must give the tenant 7 days notice in writing. This can be hand delivered to the tenant
- When the agent returns to take control of the goods, it can be on any day of the week between the hours of 6am and 9pm. However, if the tenant’s business operates outside those hours, the agent can attend at a time when the business is in operation
- CRAR will only apply to commercial rent and cannot be used at all if any part of the demised property is residential
- Only rent arrears can be recovered. Even if service charge etc is reserved as rent, CRAR cannot be used to recover the outstanding money
- A minimum of 7 days’ unpaid rent will be necessary to use CRAR
So, for landlords, the main issue will be the giving of notice in writing by the enforcement agent to the tenant 7 days before any action can be taken to secure the tenant’s goods. This notice can be dispensed with if a landlord can get a court order, in cases where it is known that the tenant will remove goods from the premises. Otherwise, landlords will need to make sure that they are ready to instruct an agent to send notice as soon as rent becomes overdue. A notice by the landlord, possibly on the rent invoice itself, will, it seems, not satisfy the regulations and a further 7 days notice must be given by the agent.
Whilst struggling but honest tenants will no doubt react to the 7 day notice by working out how to pay there is a fear that less scrupulous tenants will remove the goods that could be seized. We will not know how effective CRAR will be until we try it.