Posted by admin - May 20, 2014 1:01 pm Landlords in Distress?

Just when you think you are up to date with the law another one changes …….

On the 6th April 2014 the landlords right of distress for rent was abolished. As happy as this may make tenants everywhere of course it has been replaced with new regulations commonly known as Commercial Rent Arrears Recovery “CRAR”.

In the good old days for landlords distress enabled them to enter a property to seize goods belonging to either the debtor or a third party and sell them however they so wished. This of course was an effective tool for landlords and meant they could recover monies owed ahead of the other creditors!

Of course landlords do still have the right to recover monies owed but now goods can only be removed by an authorised enforcement agent. The debt can only relate to basic rent on commercial premises which can include VAT and interest, but the claim cannot be increased with “other charges” such as rates etc. Also the amount outstanding has to exceed the minimum of 7 days rent.

The enforcement agent can only seize goods between 6 a.m. and 9 p.m on any day of the week. The only exception is if the tenants business hours are not within these permitted times. Force cannot be used to enter premises or vehicles for the first time without a court order. The enforcement agent cannot take goods belonging to a third party or certain items that are required for personal use by the debtor in connection with employment, business or trade, study or education up to £1,350. Once the enforcement agent has seized goods they can only sell the items by public auction and they must wait at least 7 clear days before the sale and also give the tenant 7 clear days notice except if the goods would become unsaleable or substantially reduce in value.

Up to this point the changes do not seem to be that significant but by far the biggest change and most hard hitting is that landlords now have to give their tenant at least 7 clear business days notice (excluding Sundays and Bank Holidays). Of course if you are thinking that is plenty of time to clear out the property, this can be shortened by Court Order if it can be satisfied that the goods would be removed by the tenant before the notice period has expired.

This seems like good news for the tenant as it now provides them with some time to seek advice. It seems inevitable that there will be greater losses to landlords and therefore I am sure they will seek greater security when drawing up a new tenancy.

A further change is that Walking Possession agreements have been changed to “controlled goods agreements”. Effectively the tenant would keep the goods but sign an agreement that they would not be removed or sold, so not really a massive change but at present it is unknown if these agreements would provide the landlord with additional security in priority to the unsecured creditors in an insolvent situation.