Commercial rent arrears recovery: will it ever be implemented?
Part 3 of the Tribunals, Courts and Enforcement Act 2007 deals with the replacement of the law of rent distress with a new right for recovering rent arrears in the commercial property sector, known as “CRAR”, a remedy for landlords of purely commercial premises provided the lease is in writing.
Back in March 2009, the Justice Minister Bridget Prentice announced to Parliament that the government would publish a consultation paper setting out its plans for measures to address concerns about the behaviour of bailiffs and providing for the regulation of their industry, together with draft regulations on seizure of goods. The timing of the consultation paper was not specified but it was announced that the changes would be implemented by April 2012. CRAR was not mentioned but it was believed at the time that the government also intended to implement CRAR in April 2012.
Distress for rent is an ancient common law remedy which allows landlords to recover arrears of rent by seizing goods and selling them to cover the arrears, without giving notice or obtaining permission from the court. If CRAR is implemented, landlords will have to serve a warning notice before exercising their new right, giving tenants the opportunity to remove their goods and clearing the way for tenants to apply to court for the notice to be set aside or to stop the process altogether in some circumstances. Landlords will not be able to act for themselves, they will have to appoint a certified enforcement agent to act instead, or apply to a judge for their own appointment.
Arrears of any payments reserved as rent in the lease can be recovered by the current remedy of distress. If CRAR is implemented, the remedy will not allow for recovery of service charges, insurance charges, rates and council tax even if these sums are reserved as rent in the lease. The amount of the arrears must still be certain or capable of being calculated with certainty but a new minimum figure must be reached, called the “net unpaid rent”, less any interest or VAT included in the rent arrears and any deductions or set-off that the tenant would be able to claim. This test will need to be calculated both when the notice of enforcement is given and when control is taken of the goods pursuant to that notice, which will require a re-calculation by landlords. A superior landlord will still be allowed to recover rent from its sub-tenant and a notice procedure will apply. There are also special provisions that will apply if CRAR is exercised in relation to an agricultural holding.
Given the 2009 announcement that various provisions of Part 3 of the 2007 Act would be implemented by April 2012 it is worth re-visiting this section of the Act. However, the actual implementation of CRAR remains uncertain, and looks unlikely to happen before at least 2013, which may be a cause for celebration for landlords.