Charlotte Fielding – solicitor in our Dispute Resolution team – discusses commercial rent arrears…

 

Distressed about commercial rent arrears?

The Tribunals Courts and Enforcement Act 2007 and the Taking Control of Goods Regulation 2013 contain changes which are intended to modernise the collection of commercial rent arrears. The changes relevant to the collection of rent arrears of commercial property came into force on 6th April 2014. Residential tenants have long received the benefit of fairly significant legal protection in relation to the collection of rent arrears. The new commercial procedure is giving commercial tenants a taste of this protection.

One of the key changes brought in by the new legislation is in relation to the remedy of distress. Distress is a remedy which has been available (under common law) to landlords since medieval times. It allowed a landlord (or the landlord’s agents) to enter the property to seize goods to the value of the arrears and sell the goods to satisfy the debt. The new legislation has abolished the right.

The new legislation has created a new process called the Commercial Rent Arrears Recovery Procedure (CRAR) to replace the common law remedy of distress. CRAR allows a certified enforcement agent to attend the property and take control of goods. The landlord cannot exercise this procedure themselves. The enforcement agent is able to attend the property and remove goods and secure them elsewhere or enter into a controlled goods agreement with the tenant (similar to a walking possession agreement under the law of distress).

The goods can then be sold for the best price which can reasonably be obtained. This sale cannot take place until seven clear days after removal of the goods and the tenant must be given seven clear days notice of the sale.

CRAR can only be used to recover rent under a written lease of commercial premises. This is the sum paid for the possession and use of the premises. It is common for leases to reserve other items as rent, for example, service charges, council tax and insurance. CRAR cannot be used to recover these sums even if they are reserved as rent under the lease. It is also important to note that if CRAR is used then the landlord will waive any right to forfeit the lease (i.e. bring the lease to an end) on the basis of those arrears of rent. A new right to forfeit the lease may develop in the future.

In order to use the CRAR procedure the enforcement agent has to give at least seven clear days notice before CRAR is to be exercised. This may prove beneficial to the landlord as some enforcement agents consider that some tenants may make payment upon receipt of this notice and not require a visit by the enforcement agent (which increases the fees payable). However, there are no figures available yet to support this assertion. There is also a potential risk that the provision of this notice may mean that the tenant removes any goods from the property prior to the enforcement agent attending thereby defeating the procedure and reducing the chances of a successful recovery.

If you are a landlord or a tenant who is thinking of exercising CRAR or CRAR is being exercised against you and you would like some advice please contact a member of our Dispute Resolution team who will be able to assist.

Testimonials

Read what our clients have to say...

View All

Excellent experience start to finish – always very responsive to any queries and the turnaround on the property I was buying was very quick, even in the busy time leading up to stamp duty deadline. Jenny was always very helpful and went above and beyond to close on a short timescale.

Ben Armitage

“Very approachable, practical solutions to problems, but most of all very responsive which I personally think is very important because if you need help, you need it quickly, or at least to know someone is looking at it for you”.

Joanne Rowe, Finance Director, Greater Manchester Chamber

“Always able to contact, very approachable, friendly and professional”

Nives Feely, JAM Recruitment

“I believe I have been able to establish a professional working relationship with everyone I have come into contact. Importantly, I sense the relationships which have been established give me the confidence that I can make contact with Davis Blank Furniss at any time and on any matter. I would also like to express my thanks to the very impressive “gatekeepers” who work in reception, not only for making me very welcome, but also for their professionalism”

Bill Pryke, CEO, Chartered Institution of Civil Engineering Surveyors

“Thank you for your efficient and friendly help throughout this process. We have had it easy but your approach has been part of that”.

Robert Amsbury (Conveyancing Client)

“I would like to take this opportunity to thank you personally for the ongoing support and assistance the firm has offered to our parents over the years. I hope also that we may be able to call on you if necessary in the future.”

Valerie Fisher (Probate Client)

“Jo always provides great service, understands our needs and delivers on her promises. Our needs are relatively simple but the complexity arises out of the volume of work and short time frames, Jo always delivers.”

Peter Fernandez, Corporate Director at Royal Bank of Scotland

“A big thank you to all who dealt with my wife’s claim… We would not hesitate to recommend Davis Blank Furniss to anyone that may be in a situation like we have been…”

Anon (Personal Injury client)

“Before putting my case in Kirsty (Morbey)’s capable hands I’ve met a couple of other solicitors. None of them listen to me as intently as Kirsty and showed me as much empathy and understanding as she did. Simultaneously she was able to look at my case from legal perspective, explain all the options and follow each of our meetings with written summary of the discussed matters (in timely manner). Her advice was invaluable and led me to successfully ending the case matter (hopeful for good). I’m forever grateful for he work and would definitely recommend her to anyone looking for reliable, knowledgeable and committed solicitor”.

Anon (Family client)
5 star service

Our Manchester office is rated 5 stars on Google