Distressing news for landlords – abolition of distress for rent from 6 April 2014

Some landlords find distress a quick and effective method of recovering rent arrears but from April this will no longer be an option. The new statutory procedure which replaces it is regarded by many as less advantageous to landlords than the old system.

The new system is the Commercial Rent Arrears Recovery procedure (CRAR) and comes into force on 6 April 2014. Landlords will then be subject to the following restrictions:

• CRAR can only be used in respect of commercial premises and not mixed use premises as before
• CRAR is limited to annual rent - you cannot use it to obtain payment of arrears of service charge, contributions to the insurance premium or other lease payments
• Rent must be at least seven days in arrears
• Seven days notice must be given to the tenant of the intention to use CRAR and then of any proposed sale of seized goods
• A certified enforcement officer must serve the notice and carry out the procedure
  Sub-tenants must be given 14 days notice to pay in lieu of their landlord

The notice periods are perhaps the most worrying change for landlords – creating a minimum of 21 days from failure to pay to receipt of cash from the sale of the goods. It is also likely that the initial notice would give a tenant opportunity remove any items of value from the premises rendering the procedure potentially valueless.

The CRAR notice may also cause the tenant to become insolvent which then can halt the CRAR procedure. For example, if a tenant is in administration (whether precipitated by CRAR or otherwise) then the CRAR procedure stops unless consent is given by the Administrator or an order of the Court.

Landlords using distress to recover rent arrears must become familiar with the new procedure before April, and review their leases to consider other options available to them. It would also be sensible to consider taking a rent deposit and requiring guarantors at the outset.