What does the new Commercial Rent Arrears Recovery Process mean for Landlords?

Commercial Dept

Rebecca Scadding of AMD Solicitors discusses the Commercial Rent Arrears Recovery process that is being introduced in April 2014.   

The Commercial Rent Arrears Recovery process (CRAR), which will come into effect on 6th April 2014, is likely to cause significant changes to the ways in which a landlord of commercial premises can legally recover rent arrears from a tenant. Replacing the previous common law right to 'distress for rent', where landlords were able to enter the premises to encourage tenants to pay the arrears or remove goods to cover the value of the arrears, the CRAR process now requires landlords to initiate court proceedings along with adhering to a number of other changes. Although these changes are complicated, the key differences include the following:-

  • A landlord will be required to serve a 7 day notice of enforcement on the tenant before enforcement agents (bailiffs) can be instructed. (This 7 day period can be shortened by the court if it is felt that the tenant may attempt to move or dispense with goods in that period.)
  • A landlord will only be able to recover rent which is more than 7 days in arrears.
  • Only 'principle rent' can be recovered, therefore, additional sums such as service charge, insurance and rates cannot be recovered.
  • Requirements as to restrictions on the time of recovery of the arrears/goods, exemptions on the types of goods that can be recovered and procedural requirements for bailiffs have also been introduced.

It is worth noting that the CRAR process is only applicable to commercial premises and does not include premises which also include occupation as a dwelling, for example where a shop premises includes a flat above.

This new statutory process is being introduced in order to iron out inequality of power between landlords and tenants, in particular to protect tenants from extreme measures that are often taken by 'aggressive' landlords and/or bailiffs in recovering rent arrears. Whilst these changes are likely to be welcomed by tenants, from a landlord's perspective, the changes replace what was a highly effective remedy for the recovery of rent arrears.

Therefore, for commercial premises with existing rent arrears, landlords should think about seeking recovery of these arrears prior to the implementation of the CRAR on 6th April 2014.

If you would like advice from our commercial property solicitors in Bristol, contact AMD Solicitors now on 0117 9733989 for a free half hour of legal advice.

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