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FIONA SQUIRE: Changes to commercial rent arrears recovery

By Herald Express  |  Posted: April 10, 2014

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FROM April 6, the Taking Control of Goods Regulations 2013 comes in to force.

The old law of distress is repealed and is replaced by a statutory regime which governs the landlord's right to seize and sell goods to recover monies owed.

Distress has always been a useful mechanism by which a landlord can go in to a tenant's premises, seize goods and sell them to set off against any outstanding rent.

However, from the April 6, these rules have changed.

Distress for the recovery of sums due in commercial leases has been abolished and replaced by what is known as 'Commercial Rent Arrears Recovery Procedure' (CRAR).

The main differences between distress and CRAR are as follows:

previously rent and other sums reserved as rent, such as business rates, insurance and service charges, could be recoverable under this mechanism. Now only rent in its proper sense — the monthly/annual rent — can be recovered.

under the old law of distress there was no minimum amount of arrears required before a landlord could go in and distrain for goods. Now at least seven days' rent must be in arrears net of any claim that a tenant may have against their landlord.

under the old rules, landlords or bailiffs could exercise the right to distress. Now only authorised enforcement agents can.

under the old rules, landlords could enter and seize goods without any warning to their tenants. Now a landlord must give a tenant at least seven days' notice unless the landlord applies for a court order to shorten the time limit of the notice on the grounds that the tenant is likely to remove or dispose of the goods to avoid their seizure.

Arguably the requirement to give seven days' notice is the main change that will seriously impede the usefulness of CRAR to landlords as it will allow the tenant the chance to remove any valuable goods from the property before the landlord goes in to seize them.

In addition, the cost of seizing goods is going to increase as from April 6 an authorised enforcement agent must be used.

If a landlord is able to seize goods then there are then further requirements that the landlord/enforcement agents must do.

A notice must be provided to the tenant as to what has been taken and this has to be done in a prescribed format.

If the goods have been removed to storage further information must be provided by way of the storage charges and the procedure for payment/collection.

The method by which the goods can be sold is now a lot stricter and there are certain requirements laid down in the 2013 regulations.

The new procedure now has serious limitation on the effectiveness of seizing goods.

The new procedure is particularly cumbersome which is likely to make it very unattractive to landlords.

Landlords should, therefore, look to other types of security for rent and any other sums due under the terms of the lease.

Fiona Squire is an associate solicitor at Boyce Hatton specialising in landlord and tenant disputes. She can be contacted on 01803 403403 or fiona.squire@boycehatton.co.uk

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