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Collection of commercial rent arrears
The common law remedy of distress will soon no longer be available for commercial landlords seeking to recover rent arrears. Whilst commercial landlords previously enjoyed the right recover rent arrears by instructing bailiffs to sell tenants’ goods without going to court, a new system of recovery has been introduced known as commercial rent arrears recovery (‘CRAR’).
Part 3 of the Tribunals, Courts and Enforcement Act 2007 requires landlords to serve a “notice of enforcement” before they instruct enforcement agents. Under the Act a seven day notice period applies. However, the court will also be provided with the power to order a reduced period if it can be shown that the debtor ‘will move or dispose of goods to prevent enforcement’. This reduced notice period may have the undesired effect of prompting some tenants to enter into an insolvency process, possibly making recovery from the landlord’s perspective even more problematic.
The rent must be in arrears by at least 7 days before a Notice of Enforcement may be served.
The new procedure will only apply where the lease in question is in writing and relates to commercial premises.
CRAR will come into force on 6 April 2014.