Distress – a thing of the past? Not just yet …

In September 2012, I wrote a brief article which explained what the possible consequences would be following the introduction of a new regime called Commercial Rent Arrears Recovery ("CRAR"). The CRAR regime looks set to abolish the previous method for recovering rent for commercial properties known as Distress for Rent.

Whilst the new regime will be similar in certain respects to Distress for Rent, there will be new safeguards and controls in place in order to protect occupiers of commercial premises.

A consultation on CRAR ended in July 2012, which appeared to have added new impetus to the introduction of the new regime. However, further delays means it is unlikely that the new regime will be in place before Summer 2013.

The government's response to the consultation which is aimed at transforming the actions of bailiffs was received on 25 January 2013, with the proposals for the new regime causing concern among commercial landlords. The main points of interest for landlords are :-

• Landlords will only be entitled to rely upon CRAR when a tenant is at least 7 days in arrears. After this timeframe a Notice of Enforcement will be required to be served on the tenant.
• Following the service of the Notice, a landlord will have to wait a further 7 days before they are able to seize goods from the premises. The period of 7 days can be shortened at the discretion of the Court, however this does not fully allay the concerns of landlords regarding how effective this remedy can be if there is no "element of surprise" as tenants will be able to remove goods from the premises to avoid them being seized.
• Any goods seized at a premises can be sold.
• If a bailiff (who under the new regime will be known as "enforcement agents") is unable to remove certain goods on the day of seizure, a "Controlled Goods Agreement" can be signed by the parties preventing the goods under this Agreement being removed by the tenant.
• If there are still concerns that goods will be removed despite being subject to a Controlled Goods Agreement, an enforcement agent will have the ability to secure the premises.

This is not the first delay which has been experienced in the introduction of the CRAR regime. However, these latest announcements from the government give a strong indication that the Distress for Rent method of recovering arrears may well be resigned to the history books by as early as summer 2013.

Further information will follow on this matter when the reform proposals are placed before Parliament.

Watch this space !

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.