Rent arrears: the end of distress? 1

United Kingdom
19/09/2006
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Landlords are likely to lose the most effective method of collecting rent arrears. The draft Tribunals Courts and Enforcement Bill proposes to abolish the right to distrain.

The Bill proposes to replace distress with a statutory procedure to be known as commercial rent arrears recovery or CRAR. CRAR will share many of the features of distress but with crucial differences likely to make the remedy less effective. Some of the differences are:

1. Its use is restricted to commercial premises (i.e., not mixed or residential).

2. Only rent arrears can be recovered. Service charges or insurance contributions cannot be recovered even if these are defined as rent in the lease.

3. The tenant must be given notice of the intention to take action under CRAR and it may apply to the court to set aside the notice.

4. There will be a minimum level of rent arrears for which CRAR may be used. In calculating the minimum amount the tenant may be able to set-off any claims it has against the landlord against the arrears.

The ability of a landlord to seek payment from a subtenant where the tenant is in arrears is preserved.

While recognising the disadvantage that landlords face compared to other creditors in that they may be unable, unilaterally, to bring the lease to an end, concerns that distress is contrary to human rights legislation and disproportionate lie behind the draft Bill.

The Bill is currently undergoing consultation.

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