Amidst a long awaited call for new changes to be made to ‘The law of Distress’ The Government has recently published new legislation reforming the process and setting out the new procedure for commercial rent arrears recovery. The Taking Control of Goods Regulations 2013 were initially made on 26th July 2013 however the Government has recently announced that the act will officially come into force on 6th April 2014.
In accordance with the current procedure, a landlord recovering unpaid rent can instruct bailiffs to enter the rented property and seize goods amounting to the value of rent that is owed. Whilst under the new regulations creditors will still be well within their rights to carry out this procedure, it may be worthwhile noting the change in terminology from ‘seizing goods’ to ‘taking control of goods’ perhaps an indication that the new recovery method will adopt a somewhat lighter approach.
Although the new legislation is relatively complex and detailed there are some key aspects that all commercial landlords and tenants should be aware of. Perhaps one of the most important being the requirement for landlords to provide a minimum of seven days’ notice in writing before applying the commercial rent arrears recovery (CRAR) process. Furthermore, CRAR can only be used to recover arrears of principal rent which have been outstanding for seven days or more, plus VAT and interest. The procedure cannot be used to recover other outstanding lease sums (such as service charge or insurance) even if these are reserved as rent.
However, commentators have already observed the pitfalls of the new legislation describing it as unfairly tipped in favour of tenants and open to abuse by those less willing to comply with the new regulations. Granted, it could be argued that the 7 day notice period provides tenants with the opportunity to remove any items of worth out of the reach of bailiffs, making it difficult to ‘take control of goods’ and recover the value of the arrear, however only time will tell if these new regulations will provide a solution for commercial rent arrear reforms.
Please feel free to contact David Tear, head of Property Litigation, for further advice on 01535 613 688.
Partner, Head of Property Litigation
This blog has been prepared by AWB Charlesworth LLP as an overview of the legislation and does not constitute advice on any specific matter. You should not take any action in relation to it without taking detailed legal advice.