Reforms to Commercial Rent Arrears Recovery (CRAR) introduced
The government has announced reforms to the common law remedy of distress for rent.
“Distress” is one of many ways in which a Landlord can recover monies owed when a tenant is unable to pay rent for a leased property.
Previously, it allowed a landlord to enter a leased property without prior notice and seize goods owned by the tenant in order to sell them and recover rent arrears. Now, as part of a wider reform of bailiff law and the rules relating to the enforcement of civil judgements, the current rules are being replaced by a procedure known as ‘CRAR’ (Commercial Rent Arrears Recovery).
Details of CRAR are set out in the Tribunals, Courts and Enforcement Act 2007 and the Taking Control of Goods Regulations 2013, introduced by the government in July 2013.
These new regulations are due to come into force on the 6 April 2014. The new rules seek to impose a CRAR process that strikes a balance between landlord and tenant and modernises current practice. The main changes are in relation to the procedures which bailiffs must follow when taking control of a tenant’s goods.
The main aspects of CRAR only apply in and to the following circumstances:
- Where the lease is in writing – this applies to all leases including tenancies at will. It does not apply to licences to occupy or tenancies at sufferance.
- To commercial properties only - not mixed-use or residential properties. CRAR will not be exercisable if all or any part of the premises is lawfully let, under-let or used as a dwelling. Landlords must beware of trying to use the CRAR where there are mixed-use premises which share a single lease. For example, where a tenant occupies a shop and lives in a flat above the shop, the lease will not be a commercial premises lease and so the CRAR cannot be used.
- To rent only – it will no longer be possible to exercise distress in respect of other outstanding amounts such as insurance or service charges.
The new rules provide that landlords must give at least seven clear days’ notice in writing before entering premises to seize goods. Once the notice period has expired, the landlord may gain entry on any day of the week. Whereas the old rules did not specify a time constraint, the new rules provide that entry can only be gained between the hours of 6am and 9pm.
The old rules provided that where a landlord served a notice upon sub-tenants to redirect rent, such notice would take effect immediately. Now, notices to sub-tenants to redirect rent will take effect 14 days after service.
It is expected that these changes will have an impact on the way in which a landlord might choose to recover unpaid rent and other sums owed to them, as these proposals will weaken the Landlords ability to recover rent through this method as it removes the element of surprise.
At Royds, our experts can advise on all areas relating to property litigation, including the new CRAR procedures and their practical implications for landlords.