When a tenant owes a landlord rent the landlord has the right to seize tenant’s goods to recover the debt which falls under the common law of distress. However, from 6th April 2014 the old common law will be abolished and a new regime of Commercial Rent Arrears Recovery (CRAR) will be introduced in England and Wales by the Taking Control of Goods Regulations 2013 (SI 2013/1984).
As the new CRAR regime will be more restricted than the law of distress, below are some of the key changes:
- The CRAR regime can only be used if the debts amount to more than seven day’s rent on the outstanding rent.
- Only certified enforcement agents will be able to take control of and sell goods.
- There has to be a lease of the property in writing before CRAR will apply. It does not apply if the premises are occupied under a licence or only an oral agreement.
- CRAR will apply to commercial premises which are defined in the Tribunals, Courts and Enforcement Act 2007 as excluding any letting where the premises or any part of it are let as a dwelling (provided that they are lawfully let). However, agricultural holdings are specifically included in the regime by s.80 of the 2007 Act.
- Seven clear days notice must be served (excluding Sundays and Bank or Public Holidays) before goods can be seized. On application to the Court this notice may be shortened if it can be shown that there is a risk that the debtor may move the goods.
- Only rent, interest due on the rent and VAT due may be recovered under CRAR. Any other charges such as service charges or insurance premium collected as rent are not recoverable.
If CRAR is to be considered using by a landlord enforcement agents must be fully informed of when and what goods may be seized and as to what can be done with the goods. Before seeking the use of CRAR it would be good practice to seek specific legal advice.