New commercial rent arrears laws to be implemented in April

The current common law ‘remedy of distress’ will be replaced on 6 April by the new commercial rent arrears recovery (CRAR) procedure, under the implementation of Part 3 of the Tribunals Courts and Enforcement Act 2007.

The procedure will make it harder for commercial landlords to seize tenants’ goods in the event that they owe outstanding rent. The current remedy of distress allows commercial landlords to recover rent arrears by appointing bailiffs to seize goods belonging to tenants and sell them on, without needing to give the tenant any prior warning. The landlord also does not need to obtain a court order prior to instructing the bailiffs.

Once the new laws are rolled out, any commercial landlord needing to recover rent arrears will have to give the defaulting tenant an enforcement notice prior to entering the premises by law. The notice must be seven clear days, and these days do not include Sundays, bank holidays, Good Friday or Christmas Day. Only rent that the tenant owes up until that date will be able to be recovered by the landlord.

It is hoped that the implementation of the CRAR will provide a standard procedure which will help to regularise the commercial letting sector, giving tenants a level of protection they did not formerly have. However, there are concerns from some that CRAR could make the recovery of rent arrears a longer, more complicated and expensive process for commercial landlords.

Angus Jackson from property consultants Bruton Knowles warned: “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.”

Other concerns relate to the fact that CRAR will only apply to basic rent, meaning that other costs such as service charges and insurance payments could still be left unpaid by commercial tenants.