New laws relating to the way in which commercial rent arrears are able to be recovered by landlords, are to be implemented in April this year.
The new commercial rent arrears recovery (CRAR) procedure will replace the common law ‘remedy of distress’ on 6 April, under the implementation of Part 3 of the Tribunals Courts and Enforcement Act 2007.
The new regulations will make it more difficult for landlords to seize tenants’ goods in the event of rent arrears. Currently, the remedy of distress allows commercial landlords to recover rent arrears from tenants by appointing bailiffs to seize their goods and sell them on. They do not need to give the tenant any prior warning of their plans to do this, or go to court before instructing bailiffs.
From April, any commercial landlord needing to recover rent arrears will be required to give the defaulting tenant an enforcement notice prior to entering the premises, and only rent that is due up to that date will be able to be recovered. The notice must be seven ‘full’ days, not including Sundays, bank holidays, Good Friday or Christmas Day.
The new regulations aim to provide a standard procedure which will afford tenants a level of protection they did not formerly have, and they seek to regularise the commercial letting sector. However, some believe that the new regulations could in fact make the recovery of arrears a more time-consuming and expensive process.
“Landlords will be particularly concerned regarding the prior notice requirement, which could give a tenant the opportunity to move any items of value to a secure location or to dispose of them, restricting the usefulness of CRAR,” warned Angus Jackson from property consultants Bruton Knowles.
Other concerns regarding the new rules are that they only apply to basic rent, meaning that items such as insurance and service charges could potentially be left unpaid by tenants.