Commercial Rent Arrears Recovery (CRAR) and the abolition of distress

On 6th April 2014, distress will be abolished and will be replaced by the Commercial Rent Arrears Recovery (CRAR).

What is distress?

Distress is a common law ‘self-help’ remedy which allows landlords to recover rent arrears by seizing a defaulting tenant’s goods and selling them. No prior notice or court approval is required before the remedy can be exercised.

Landlords can use distress to recover arrears ahead of other creditors. It is a quick and cost effective remedy, particularly where the tenant has valuable goods on the premises. The costs of distress are reasonable. Most Bailiffs either charging a fixed fee, or a percentage of the monies recovered so there are no ‘up front costs’ for the landlord.

But successive governments have expressed concern that distress is a ‘medieval’ remedy. That it's carried out with the tenant having no prior notice of a Bailiff visit. Also, there has been concern that the tenant has no opportunity to dispute the debt claimed. Or have the opportunity for the Court to rule on the issue which is particularly relevant if the tenant has a genuine dispute about what the landlord is claiming.

The abolition of distress and its replacement

Distress will be abolished on 6th April 2014. In its place is the Commercial Rent Arrears Recovery (CRAR) procedure set out in the Tribunals Courts and Enforcement Act 2007.

The purpose of CRAR is to maintain the principle of a landlord being able to seize a tenant's goods to pay rent arrears. But subject to a strictly controlled statutory process.

CRAR will only apply to Commercial properties. It can't be used for either residential or ‘mixed use’ premises (e.g. many public houses with residential accommodation above the bar). The exercise of CRAR is subject to various rules on the serving of notices, the manner of entry onto the demised premises by the ‘Enforcement Agent’, the securing of the tenants goods, and the removal of those goods for sale. There are also new criminal sanctions for tenants or third parties who interfere with goods which are subject to the new ‘Controlled Goods Agreements’ which will be used after 6 April 2014.

Need advice? We can help you

Do you need advice as how the abolition of Distress and the Introduction of CRAR will affect you as either a landlord or tenant of commercial premises? Or are you the landlord of a ‘mixed use’ property and want advice on your options for recovering arrears following the abolition of distress? Then please call Gary Stephenson on 01482 324252 or email gms@gosschalks.co.uk.

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