RECOVERING RENT ARREARS – IMPORTANT CHANGES ARE AFOOT

The ancient remedy of distress allows a landlord to seize a tenant’s goods, sell them and use the proceeds in satisfaction of unpaid rent. There are many complicated technical rules as to when and how distress may be levied
When the relevant provisions of the Tribunals, Courts and Enforcement Act 2007 come into force, distress will be abolished in favour of the statutory remedy to be known as Commercial Rent Arrears Recovery (“CRAR”). At the date of this article, no date has yet been set.
Key features include:
• CRAR will only apply to tenancies of commercial premises that are documented in writing. It will generally not be available to landlords of mixed commercial and residential tenancies.
• CRAR will only be used to recover rent, interest and VAT. It will not be available for service charge or insurance arrears, whatever the lease says.
• Once a lease ends, CRAR will only be exercisable in certain circumstances.
• There will be a minimum level of “net unpaid rent” to be owed before CRAR may be exercised.
• Some procedures will be similar to the current law. Where the tenant has granted a sublease but then fails to pay his rent, his landlord will be able to serve notice on the subtenant requiring him to pay the sublease rent direct to the landlord until the tenant’s arrears are settled.
• Before exercising CRAR, landlords must serve notice on the tenant informing him of the risk of enforcement action.
• A tenant can apply to court for the notice to be set aside or for any enforcement action to be delayed.
• In exercising CRAR, the landlord must employ a certificated enforcement agent.
• If an enforcement agent seizes goods belonging to a third party, they will be entitled to recover them provided notice is served in time.
If you would like to know more about how Commercial Rent Arrears Recovery will operate, please contact Caroline Wilton.

Filed: 12/11/2007 22:53:29