As discussed in our previous tip of the week Back to Black, there are a number of options open to a landlord when a tenant falls into arrears. One option is to issue debt proceedings. From 1 October 2017 a new Pre-Action Protocol will apply to debt proceedings issued against individuals (including sole traders). This will effectively make it more difficult and time consuming for landlords to recover arrears owed by tenants who are individuals.
The new Pre-Action Protocol will require landlords to furnish defaulting tenants with detailed information in relation to the debt, and to provide extra time for repayment and to allow for the tenant to obtain debt advice. Failure to comply with the Protocol may incur cost penalties in any subsequent proceedings. The aim is to protect individuals from premature debt actions and to encourage the negotiation of payment plans or other forms of dispute resolution.
In anticipation of the new Protocol, landlords may wish to consider other ways to protect themselves against default by tenants who are individuals. For example:
- Review any outstanding arrears: consider taking action before the new Protocol takes effect on 1 October;
- Require additional security on the grant of leases to individuals: by way of a rent deposit or guarantee;
- Consider taking action as soon as debts arise: the sooner the arrears are brought to the tenant's attention, the sooner the recovery process can be commenced;
- Make use of alternative methods to recover arrears: such as the Commercial Rent Arrears Recovery procedure (seizure of goods/distress) or service of a statutory demand (where the debt is over £5,000, in the case of an individual).