All that is required is a change to the existing legislation on recovery of commercial rent arrears.

The Commercial Rent Arrears Recovery (CRAR) regime, enacted under the Tribunals, Courts and Enforcement Act (TCEA) 2007, has never been formally brought into force. Landlords remain within their rights, under the Law of Distress (Amendment) Act of 1908, to instruct a bailiff to enter the premises of a occupier in arrears and ‘levy distress’ on the occupier’s goods.

Favouring the occupier

The result of the latest public consultation on CRAR adoption will be published by the government in October. It appears likely that the old law, as it affects rent arrears, will be superseded by CRAR. Landlords may still instruct bailiffs to enter a property and seize goods. However, CRAR incorporates some ominous changes:

• Enforceable only after seven days rent arrears become due
• Landlords may have to give 14 days notice of enforcement
• Rent and VAT are covered by CRAR, but service charge is not
• Seized goods must belong to the debtor, and not just be in ‘reputed ownership’
• No part of the property should be being used for dwelling

A better way

The occupier’s primary objection to the current law is that a bailiff may be instructed as soon as the debt arises. By simply legislating for more time before bailiffs can make entry, there would be no need for CRAR.

It is a sledgehammer to crack a nut, enabling the occupier to remove and/or dispose of assets or use part of the property as a dwelling in order to frustrate the intent of the law. If brought into force, landlords may raise the stakes by increasing rent deposits, seeking occupier contributions towards working capital or tightening lease conditions on service charge arrears. These actions will do occupiers no favours whatsoever.

This article is part of our autumn 2012 edition of Asset Class.