Posted by Caroline Preist, Partner
Dilution of landlords’ enforcement options – CRAR
Where a tenant of commercial property is behind in rent, Distress (or ‘Distraint’) entitles the landlord to send in a bailiff to seize the tenant’s goods, and then sell those goods to pay off the rent arrears. From 6 April 2014 this ancient remedy will be thoroughly overhauled.
The revised process is known as CRAR, standing for ‘Commercial Rent Arrears Recovery’. The landlord’s right to enter and seize goods will remain, but restrictions will apply, and landlords must now follow a set procedure. The main changes are:
• Landlords must give advance notice to their tenant – a minimum of seven clear days. The old rules gave the landlord the distinct advantage of surprise.
• The remedy applies only to ‘true’ rent arrears, that is, sums payable for use and occupation, including VAT and interest. It does not apply to service charges or insurance contributions even if these are called ‘Rent’ under the lease.
• Various restrictions will apply on what can and cannot be seized, the time the bailiff can attend and how the goods must be held after seizure.
These changes clearly favour tenants. Only time will tell if CRAR has stripped all the effectiveness from the old remedy. For some tenants, a intimidating ‘enforcement officer’ standing in their premises handing them a seven day notice will be persuasive enough. For others, that seven day period will be a useful window to explore avoidance options, such as relocating stock that would otherwise be seized.
Landlords should be aware that CRAR (and Distress until 6 April 2014) is only one of their options for problem tenants, and they should consider their options carefully. Tenants should be aware that CRAR is still intended to result in their goods being seized and sold, which could be damaging for their business.
For more information about CRAR or the options available to landlords and tenants contact our Property Disputes team on 0800 923 2070 or email email@example.com.
Commercial property and premises are a vital part of most businesses.