Posted: Sunday, 3 March 2013 @ 16:07
It now looks likely that the ancient law of distress will be abolished this summer. But what does this mean for commercial landlords and tenants?
The proposal was first made 22 years ago, and the legislation passed back in 2007, but it was never brought into force. But the government has recently announced that they will introduce it this summer.
What it will mean is that landlords will not be able to send in bailiffs to seize goods without due notice. No longer will tenants in arrears of rent have to dread the sudden arrival of commercial rent enforcers and summary seizure of their goods, and possible sale at a knock down price.
Known as CRAR-government loves an acronym-short for Commercial Rent Arrears Recovery, the new system will provide a statutory framework for recovery of arrears of commercial rent.
Distress will be abolished, and in its place a new system will allow distress in certain circumstances and where due notice has been given. In all other situations there will be no remedy of distress available and landlords will have to look to other means such as court proceedings or forfeiture.
There will be a minimum amount of rent set for the procedure to apply. Any less and the landlord will not be able to recover rent by this process. Also, if the lease includes residential property, the landlord will not be able to use the procedure.
CRAR will not be available for verbal tenancies-there must be a written agreement in place. CRAR is available for tenancies at will but not for a tenancy at sufferance or occupation under a mere licence.
CRAR is only available for the recovery of rent, payment for occupation, and for example does not cover service or other charges even if they are defined as rent in the lease
To engage CRAR the landlord will have to give the tenant a written notice calculating the rent which has fallen due and is unpaid, any interest payable, and any VAT applicable. In assessing whether the sum due has achieved the minimum threshold, interest and VAT are not included, and there are some allowable deductions such as those which would be allowed to a tenant in a court action for unpaid rent. These include a claim for set-off.
Once the written notice has been served by the landlord, the tenant has the option of applying to the court, and the court will have the power to set aside the notice or delay its execution.
Only authorised enforcement agents will be able to seize goods when the CRAR notice has expired. The way in which enforcement takes place is specified in the new CRAR procedure.
We now await the detailed regulations which will set out the minimum sum for CRAR to apply, the notice period, and the form of notice.
Business and Litigation Solicitor
Tel: 0845 003 5639
Blog by Nigel Musgrove
Nigel has been providing dispute resolution advice as a solicitor for over 35 years. As well as advising SMEs and business owners on disputes he also offers a specialist licensing law service. View profile
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