A new commercial rent regulation, the Commercial Rent Arrears Recovery (CRAR), will take effect in the spring of next year to replace the common law right of landlords to recover “pure” rent arrears. It will only be used as compensation for unpaid rent, including VAT and interest, but will not include related costs, such as service charges and insurance.
Landlords will not be able to use this remedy if the property or any part of it is being used as a residence. The only exception to this provision is if the occupier is in breach of terms of the lease.
While the changes will no doubt be welcomed by tenants, landlords may not feel the same. The legal remedy they have traditionally relied on to settle a dispute with a tenant will be rendered “very much toothless” by the changes being made under the new regulation.
Under the current remedy, the landlord can act personally or appoint a certified bailiff to enter a property once the tenant is in default to remove goods owned by the tenant and sell them for up to the value of the rent arrears. These actions allow the landlord to recover the amount owing without having to go to court.
Under the new system, a landlord will be required to serve a “notice of enforcement” on the tenant before being able to follow up by sending in enforcement agents. Seven days’ notice will be required. The court will be able to order a shorter notice period if it finds the tenant is likely to move or dispose of personal property to prevent enforcement.
Landlords will not have the right to use CRAR against a tenant unless the amount owing is either equal to or greater than seven days’ rent arrears. The new regulation will be introduced alongside laws which are intended to protect the public from what have been described as “aggressive bailiffs.”
Once the changes come into force, bailiffs will not have the right to seize property for residential rent arrears unless the landlord has taken the extra step of going to court first. Even when permission is granted, bailiffs will be subject to strict rules about when they can enter premises and what types of items can be taken to satisfy a debt.
Further regulations, which require mandatory training and certification for bailiffs and set costs for the industry, will be published in the next few months.
