October 3, 2014

New bailiff rules give commercial tenants better protection

New rules for seizing a commercial tenant’s goods in the event of unpaid rent have been introduced, which should give tenants better protection.

CRAR (Commercial Rent Arrears Recovery) came into force on 6 April 2014 in England and Wales and replaces distress for rent.

Like distress for rent, CRAR gives landlords the right to instruct an enforcement officer, in writing, to enter the premises of a tenant in arrears, to seize and sell the tenant’s goods in order to recover their unpaid rents.

However, unlike distress for rent, there are limitations of CRAR which gives certain protections to commercial tenants.

For example the new Act states that there must be a lease and a licence will not do.

CRAR can only be used in relation to purely commercial premises, if any part is used for dwelling CRAR is not permitted.

Further protection for tenants in the Act includes taking away the potential for a bailiff to recover sums other than pure rent.

Under the new act, rent is defined as 1) pure rent, 2) any interest payable under a lease, and 3) any VAT. Not included is any other sum such as council tax, rates, service charges, insurance, other maintenance charges or any other ancillary payments.

Note also that the Landlord must now give the Tenant seven days notice of enforcement after the rent becomes overdue.

While the distress for rent system often encouraged tenants to pay off arrears, it was considered particularly draconian and unfit for the twenty-first century, so tenants should welcome the limitations of CRAR.

Written by Stephen Welfare, a Partner at Royds LLP Solicitors.

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