The end of distress
On 6 April 2014, the self-help remedy of distress is being abolished. It will be replaced by the Commercial Rent Arrears Recovery (CRAR) Regime. This scheme gives commercial landlords or their mortgagees a right to recover arrears using a prescribed enforcement procedure. The key features of CRAR are:-
- It will only apply to commercial premises, meaning that it cannot be used to recover arrears of rent in respect of premises which are occupied or are let as a dwelling, including where the dwelling is part of the commercial premises (i.e. a flat above a shop).
- The tenancy must be evidenced in writing, mean that licences to occupy would be excluded.
- It can only be exercised if the outstanding sums exceed a minimum of seven day’s rent (after the deduction of interest, VAT and set-off).
- Landlords can only recover basic rent and not arrears of service charge, rates and insurance, even where they are reserved as rent in the lease.
- A seven day minimum notice period must be observed prior to the seizure of goods.
- CRAR can only be carried out by an enforcement agent i.e. an authorised Bailiff, meaning that the landlord can no longer exercise this right.
The changes will see the end to a quick and effective way of recovering rent arrears and due to the requirement to give notice, it is unlikely that distress is going to be an effective remedy. Therefore, landlords may wish to protect themselves by seeking alternative forms of security in the form of rent deposits and guarantees.
If you would like any more information about this, please contact Peter Corrigan.