The common law right to recover rent arrears by seizing and selling a tenant’s goods is to be abolished in April this year and replaced with a new system of commercial rent arrears recovery (CRAR).
CRAR may only be used for commercial premises. Should the lease cover a mixed use of commercial and residential property, CRAR may not be used by the landlord and the landlord will need to obtain a judgment to recover the arrears.
Under CRAR, only basic rent reasonably attributable to the “possession and use” of the premises can be recovered.
CRAR cannot be used to recover unpaid service charges, business rates, insurance charges etc, even if they are reserved as rent in the lease.
There must also be a written lease in place and any contract or lease that seeks to amend or avoid CRAR provisions will be void.
An important part of distress is that no prior notice or court order is required except in certain insolvency situations to seize goods which effectively means the tenant does not have an opportunity to put goods out of the landlord’s reach.
The very fact that bailiffs turn up to seize the goods can be sufficient encouragement for the tenant to pay the arrears without the goods having to be sold by the bailiff.
The most far reaching change under CRAR, is that before CRAR is exercised seven clear days’ notice of enforcement must be given to the debtor.
The Court can order that the notice period be shortened where it is satisfied that it is likely that goods will be moved.
Landlords will need to act quickly if there are substantial arrears to make use of existing rates.
When granting new leases of mixed use premises landlords will need to consider whether to deal with residential premises by way of separate documentation.
It will be more important than ever to ensure tenant’s are not allowed to fall into arrears.
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