The introduction of Commercial Rent Arrears Recovery (CRAR) in England and Wales has been delayed until summer 2013. CRAR is a statutory right for landlords to recover unpaid rent by seizing and selling goods held on business premises. The new procedure is to replace the similar, self-help remedy of distress but with new safeguards and controls to protect occupiers.
The proposed change in the law has led to concern amongst landlords that their ability to recover arrears will be severely curtailed at a time when many tenants are defaulting, as demonstrated by recent high profile failures in the retail sector.
On 25 January 2013, the Government published its belated response to the consultation on "Transforming Bailiff Action", which ended in May 2012. The response sets out the Government's current thinking in relation to the introduction of CRAR and abolition of distress:
- The intention remains to abolish distress and make CRAR available for use against commercial (but not residential) tenants.
- Landlords can only serve a notice of enforcement, entitling them to use CRAR, where the tenant is at least seven days in arrears.
- The minimum period between serving notices of enforcement and seizing goods is to be reduced from 14 days to 7 days, although the court can shorten this period. This may go some way to allay landlords' concerns about the usefulness of CRAR as a remedy.
- The new regulations will permit the sale of seized goods at the premises.
- A "controlled goods agreement" can be signed by the parties, avoiding the need for the goods to be removed from the premises immediately.
- Where the bailiff (to be known as an "enforcement agent") has concerns that the tenant will remove goods to avoid enforcement, he will be able to secure the premises.
- The legislation contains a procedure similar to that which currently exists for allowing landlords to recover arrears from sub-tenants.
The slow progress of these reforms has previously left the market sceptical as to whether they will ever come into force but these latest announcements suggest the Government is gathering pace. Whether the political agenda will allow parliamentary time for the final push remains to be seen. Landlords should, however, be prepared for the possibility that the remedy of distress, which they currently depend upon, may soon be replaced by CRAR with all its anticipated shortcomings.
A full copy of the consultation response can be reviewed at: