Viewpoint: Proposed changes to the Law of Distress: The end of the old fashioned bailiff
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The Government is currently proposing changes to the Law of Distress, which is now to be called Commercial
Rent Arrears Recovery (CRAR).
This will have significant implications upon the ability for landlords (or their agents) to collect rent, service charge and insurance.
There will be specific requirements that need to be fulfilled for the CRAR procedure to be used.
- It will only apply to tenancies of commercial premises (including tenancies at will).
- There must be written evidence that a tenancy exists (no more unwritten common law tenancies).
- It can only be used to recover pure rent and in relation to the use of the subject premises. It cannot be used to recover arrears of service charge or insurance, even if reserved as rent in the lease.
- It is likely that a minimum value of net, unpaid rent will be set.
There will be a set procedure put in place to use CRAR. It is proposed that:
- Notice will have to be served on the tenant before enforcement action can be taken (it is not yet known what length of notice).
“Enforcement Agents” must be used (previously known as bailiffs).
- If an arrangement is put in place with an enforcement agent, pending payment by the tenant, this will now be known as a Controlled Goods Agreement (formerly Walking Possession).
Other changes to note are:
- A tenant can apply to Court for the original notice to be set aside, or for any enforcement action to be delayed.
- Section 6 of the Law of Distress Amendment Act 1908 (subtenant rents) is repealed; but is to be replaced with a similar system to allow a Superior Landlord to request the sublease rent to be paid to them until such time as the tenant’s arrears are paid.
- The required attendance by bailiff between sunrise and sunset is now removed and replaced with “normal trading hours” – meaning whatever is normal for that business.
Clearly this proposal will have a serious impact for landlords/agents, as the ability to distrain for other sums reserved as rent is removed and may now involve more time in Court attempting to recover these charges. Also, now that tenants require to be informed of impending action, this could give them the opportunity to remove goods from the premises or take other steps to avoid attendance by Enforcement Agents.
It will also have significant implications on the ability of a landlord to manage their income effectively, if tenants learn to “play” the system. Tenants will be able to pay their rent, but withhold service charge money knowing that immediate action cannot be taken against them; any legal or Court action could be timely and costly, putting a tenant more in control of when service charge is paid. This may result in delayed payment to suppliers and, in consequence, landlords being required to fund service charge accounts whilst monies are recovered .
To download the pdf version, please click here.
For more information or advice please contact:
Alan Christie
National Head of Credit Control
+44 (0)115 9501414
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