Distress for arrears of rent
Simon Wood, Barrister and Property litigation lawyer at law firm Hart Brown, outlines the effects on landlords, and tenants, of the new regulations concerning rent arrears.
As of 6 April 2014 the ancient remedy of distress for rent has been abolished and replaced with a new procedure of commercial rent arrears recovery (CRAR). The new regulations are set out in the Taking Control of Goods Regulations 2013.
The new procedure only applies to commercial premises. There is now no procedure for seizing the tenant's possessions in respect of rent arrears relating to residential properties, which will include mixed-use premises such as a shop with flat above. The only remedy for a residential landlord will be to issue court proceedings.
Prior to April 6th, the law and cost structure relating to enforcement by the seizure and sale of goods was complex, unclear and confusing. It was contained in a mixture of numerous statutes, secondary legislation and common law, much of the language of which was archaic. This could result in enforcement agents misrepresenting their legal authority to the detriment of debtors. Nevertheless, landlords had a relatively cheap and straightforward means of persuading recalcitrant tenants to pay their rent arrears.
The principal and most controversial difference is that the landlord must now serve the tenant a notice in advance of seizing the goods. This is to give the tenant the opportunity to obtain legal advice and/or to pay the rent. The notice must be given seven clear days before the goods are seized. The notice must be in writing and must contain prescribed information. The landlord can apply for a reduced notice period if there is a risk that the tenant may remove or dispose of the goods, although as yet it is not clear what evidence the court will require. Any application will of course incur further costs for the landlord.
The landlord also has to take greater care with respect to the sums for which the new remedy is available. CRAR only applies to rent and so cannot be exercised in respect of sums for service charges and insurance even if they are reserved as rent under the lease. The landlord is also required to take account of the value of any right of set-off or counterclaim.
Although the new legislation brings some welcome clarity, there is no doubt that it tilts the balance further in the tenants' favour, introducing a more bureaucratic and costly remedy for the recovery of rent arrears. One consequence may well be that landlords will take greater security in the form of a rent deposit at the commencement of the tenancy.
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Simon Wood, Barrister, Property Litigation
Background information to the new legislation:http://www.legislation.gov.uk/uksi/2013/1894/pdfs/uksiem_20131894_en.pdf
About Hart Brown
Hart Brown, a leading law firm with offices throughout Surrey and in London, has been offering a full range of legal and financial investment services to businesses and individuals for the past 90 years. With 15 partners, more than 110 staff, six offices and a reputation for delivering high quality service, Hart Brown is committed to building long-term relationships with its clients.
In particular, the firm puts great emphasis on regular communication with clients, as well as the need for efficiency and value for money in order to deliver a high-quality service. Hart Brown currently operates from offices located in Cobham, Cranleigh, Godalming, Guildford, Wimbledon Village and Woking. For more information please visit www.hartbrown.co.uk
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