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“Act Now” Landlords told Ahead of Bailiff Reform

Posted on 14 March, 2014 by Cliff Goodwin

Landlords are being urged to start legal action immediately to recover outstanding rents ahead of new legislation curbing the powers of bailiffs.

From 6 April the common law of distress, which allowed bailiffs to seize and sell goods to recover rent arrears without warning, is being replaced by Commercial Rent Arrears Recovery (CRAR). Under the new regime property owners will only be able to recover unpaid rent through enforcement agents, the new name for bailiffs.

There will also be significant changes to what a landlord, or his representatives, may seize to pay off outstanding rent. With the deadline less than a month away, property owners should review any service charge and insurance arrears that are already overdue, or are likely to become overdue shortly after the next rental quarter date of March 25.

“Landlords may need to consider taking bailiff action immediately to protect their position,” suggests Jay Rutter, head of commercial property management at the Yorkshire-based Eddisons.

The key elements of CRAR are:

• CRAR is only available to landlords of written leases of commercial premises. It will not be available where premises are let or occupied as a dwelling, unless the residential occupation is in breach of a lease. Nor will it not be available to landlords of retail premises with flats above and included on the same lease.
• CRAR can only be used to recover rent, VAT and interest, but not other sums such as service charges or insurance, irrespective of whether they are reserved as rent. Where rent includes these items, only a proportion reasonably attributable to the possession and use of the premises is recoverable under CRAR.
• Before CRAR is exercised seven clear days’ notice of enforcement — excluding Sundays, Christmas Day, Good Friday and Bank Holidays — must be given to the debtor. There is the ability, however, for a court to shorten the notice period where it is satisfied that goods will be moved to avoid them being taken. A court also has the power to set aside a notice of enforcement, or order that further steps cannot be taken under CRAR, without its authorisation.

The new law bans enforcement agents from taking action on residential elements of a mixed-use lease, raising potential problems for commercial properties with domestic accommodation on the same lease.

It would now be sensible, says Rutter, for landlords in the process of granting new leases to divide the commercial and residential elements into separate leases, allowing them to use an enforcement agent on the commercial part in the future.

From April a Controlled Goods Agreement is also being introduced which must be signed by the tenant before any item can be removed. “Part of the effectiveness of using a bailiff in the past has been its immediacy and shock value,” added Rutter. “Tenants don’t relish being blacklisted and in a case where the landlord owns many adjoining properties, like a shopping centre, it can send out a clear message to all the other leaseholders.

“The new system, however, does allow for a greater period of negotiation between landlord and tenant, which may ultimately avoid the premises being left empty.”

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