Holly Sadler explains changes in the law on the recovery of commercial property rent arrears

Holly Sadler of Gotelee Solicitors

Holly Sadler of Gotelee Solicitors - Credit: Archant

Changes in the law due next April will affect the options available to commercial property landlords to recover rent arrears.

Commercial landlords have for a long time used the common law remedy of Distress to seize and sell the goods of tenants to recover rent arrears.

Distress provides a quick and cost-effective method to secure payment from a defaulting tenant. However, Distress for commercial rent arrears will be abolished by new regulations published last month (Taking Control of Goods Regulations 2013).

These reforms, due to come into effect in April 2014, create a process called Commercial Rent Arrears Recovery (CRAR) which landlords must abide by when seizing a tenant’s goods for failure to pay rent. The key points of the new process are:

: : The landlord must provide the tenant with seven days’ notice of enforcement action ? a significant change, as previously no notice was required, which may provide the tenant with an opportunity to remove goods from the premises to avoid them being seized;

: : The process is not available where part of the premises is used for residential purposes.

: : The process is only applicable to rent, not to a service charge or other sums due under the terms of the lease;

Most Read

: : The process known as “walking possession”, whereby a bailiff can seize goods but leave them on the premises, will be replaced with “Controlled Goods Agreements” and will be the subject of more stringent requirements, as will the process under which the goods can be sold.

: : The new process requires the landlord to give a sub-tenant 14 days’ notice of a requirement to pay rent direct to them, whereas at present such notice takes immediate effect.

: : A further change is that CRAR can be exercised on any day, in contrast with Distress which cannot be exercised on a Sunday or Bank Holiday.

The changes will no doubt please commercial tenants, as they weaken the position of landlords and create additional red tape to overcome in the recovery of rent arrears.

To counter the effect of the changes, landlords may be forced to take preventative steps such as taking larger rent deposits and letting any residential part of their property on a separate residential tenancy to ensure that CRAR can still be used in respect of the commercial part of their property.