Commercial Rent Arrears Recovery
s.71 Tribunals, Courts and Enforcement Act 2007 states:
“The common law right to distrain for arrears of rent is abolished”
This simple sentence will affect all landlords and their ability to recover outstanding rent from tenants. It will remove a vital tool in the landlords armoury and as the ‘credit crunch’ continues to bite, it has never been more important for Landlords to fully understand the implications and practical consequences of this and other important changes in this area of law.
The Tribunals, Courts and Enforcement Act 2007 entered the Statute Books on 19th July 2007. It is an Act with wide ranging scope and of huge practical importance. The ground breaking provisions relating to ‘Enforcement by Taking Control of Goods’ and ‘Rent Arrears Recovery’ are not yet in force.
The all important Regulations which will set out the ‘detail’ that landlords (and others) will have to comply with have yet to be drafted. The precise scope of these Regulations and their format will be subject to consultation. It is hoped that the consultation will be wide ranging and that sufficient notice will be taken of landlords interests, both in practical and in economic terms.
The new framework
For the purposes of this article, I will just set out the general provisions relating to Commercial Rent Arrears Recovery, or CRAR. However, the Act also makes other sweeping changes to other methods of enforcement, and not just in respect of rent arrears.
Firstly, a landlord of commercial premises may use a procedure set out in Schedule 12 of the Act to recover rent arrears from a tenant.
It is important to note that ‘commercial premises’ does not include premises which have any part of the demised premises occupied as a ‘dwelling’. This would cover the ‘manager living above the shop’ situation; which together with the case of Pirabakaran probably sounds the commercial death knell for the ‘one lease fits all’ business model.
‘Rent’ does not include rates, council tax, repairs, maintenance or insurance, irrespective of whether it is defined as ‘rent’ in the lease.
Schedule 12 sets out the general framework for ‘Taking Control of Goods’. Although this is similar in effect to the current ‘walking possession agreements’, there are important differences. It can only be undertaken by an ‘Enforcement Agent’ (a High Court Enforcement Officer/ certified Bailiff) and only after the debtor tenant has been given notice. The minimum period of notice has not been determined, nor has the form of the notice, nor who must give it. There is scope for the Court ordering less notice being given, if the Regulations permit.
It is not all doom and gloom. On the flip side, the enforcement agent may use reasonable force to enter the demised premises, but this may be subject to restrictions to be imposed by Regulation. The regulations will also set out what times during the day the Enforcement Agent can be at the premises.
The proposed Regulations will also set out other requirements that will affect how the Enforcement Agents will operate and prescribe forms of notices, forms of inventory, valuations and sales. These will principally effect the Enforcement Agents, but it may be important for the landlord to appreciate what these are so that the best method and approach in recovering arrears can be determined.
Should you have any current problem or wish more information on these new changes or would like to be involved in any consultation exercise then please contact Mark Williams.