“The system needs to combine sensible powers to deal with deliberate evasion by some debtors, with stronger requirements for accountability and professionalism within the industry.”
Parliamentary Under Secretary of State for Justice
The next change to take effect under the Tribunals, Courts and Enforcement Act 2007 involves the replacement of the current system for recovery of rent arrears with CRAR - a “commercial rent arrears recovery” process. Prior to implementation, the Ministry of Justice is seeking responses to a consultation paper entitled “Transforming Bailiff Action”. The abolition of the common law right to distrain for arrears of rent will proceed but views are sought on the new procedures.
Existing common law remedy
The existing common law remedy of distress permits a landlord, or an authorised bailiff acting as the landlord’s agent, to enter leased commercial premises without giving notice and without seeking the permission of the court. Entry is for the purpose of seizing goods to satisfy arrears of payments reserved as rent in the lease. This may include payments of service charge, insurance, VAT and interest on late payments as well as basic rent.
CRAR – the main changes
The new procedure will require a landlord to give a tenant 14 days’ notice of its intention to commence the process whether he intends to do so himself or by using an enforcement agent. It is suggested that there should be a minimum of seven days’ unpaid rent before the process is initiated. From a tenant’s perspective, the 14 days’ notice allows a period of grace before their business can be closed down. However, landlords are likely to object to the timescales on the basis that such a long notice period may give the tenant sufficient time to remove valuable assets from the premises before the enforcement agents are entitled to enter the premises to seize the assets. It is unlawful for a tenant to remove assets that are subject to an enforcement notice, but this would not apply during the 14 days’ prior notice period. There is provision for the landlord to apply to the court to reduce the notice period to seven days and it is likely that in practice landlords will do this every time, rather than selectively.
Access to the commercial premises has to be taken between the hours of 6.00am and 9.00pm unless the premises are regularly open for business outwith those hours. Entry must be taken via a door (i.e. it is no longer possible to take the entry via an open window).
The rent recoverable under CRAR specifically excludes any amounts in respect of rates, council tax, service charge, insurance, repairs or other ancillary outgoings even where the sums are reserved as rent under a lease. Where rent is inclusive of such other amounts, only the proportion that is reasonably attributable to possession and use will be recoverable under CRAR.
The consultation raises a number of questions on national standards for enforcement, clarification of the law, costs of enforcement related services, the regulatory regime, competence of enforcement agents, remedies and complaints handling, court jurisdiction and an impact assessment.
Divergent views will emerge depending on whether replies to the consultation are on the behalf of the landlords, tenants or rent recovery professionals, so it is not possible to predict an outcome. The consultation closes on 14 May 2012 and the Ministry of Justice intends to issue the response paper in October this year