Commercial landlords are set to face fewer options with regard to recovering rent arrears when legal changes come into force in April 2014, law firm HLF Berry has cautioned.
The current law allows landlords to seize tenants’ assets in order to recover any outstanding rent, a legal right known as distraint. This process enables landlords to employ a bailiff without the need to serve notice to tenants.
Distraint is set to be replaced by CRAR (Commercial Rent Arrears Recovery) in April next year, which will change the rights of commercial landlords in the process – and those of tenants too.
Landlords, from April onwards, will face potential obstacles when they want to seize assets in place of owed rent from tenants. In a similar fashion to residential landlords, commercial landlords will need to give notice and tenants will be able to petition for a court order delaying distraint for rent.
HLF Berry Partner Paul Hannam said: “Commercial landlords should be aware that they may be restricted over how they can regain rent arrears from tenants from April 2014. However, although landlords may suffer as a result of this legal change, many businesses could benefit.
“CRAR is seen by some as an overdue protection measure for tenants – after all, residential tenants cannot have their assets seized unless their landlord has gained a County Court judgement, and even then the matter needs to be pursued through a bailiff.
“Soon commercial tenants will have the right to delay the seizure of their assets. This could prove beneficial for both parties, in fact, as distraint isn’t always the best answer, given that small businesses often lease equipment so seizing it could complicate the situation further.”
He added: “There will also be occasions when landlords will not be able to distrain, full stop, such as when the business premises are below a flat, although in this instance if there is a separate lease it may still be possible.
“As an alternative, landlords might want to pressure tenants into taking action by presenting them with a winding-up petition. Depending on how easily the commercial property could be re-let, this option could work well for some landlords – and for others, just the threat of bankruptcy could be enough to make the tenants take the matter seriously.”
If you are a landlord or tenant and would like legal advice on the upcoming changes to distraint, you can contact HLF Berry’s specialist Landlord and Tenant team on 0161 681 4005