New rent recovery rules 'could upset owner-tenant relationship'

14-Jan-2014 - Last updated on 14-Jan-2014 at 08:46 GMT

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Bruton Knowles' Angus Jackson: 'The new procedure is narrower in scope and likely to be less useful to landlords'

New regulations governing the ways in which landlords are able to recover commercial rent arrears could upset relationships between owners and tenants, according to property consultancy firm Bruton Knowles.

The new commercial rent arrears recovery (CRAR) procedure is due to come into force on 6 April 2014, replacing the 800-year-old common law ‘remedy of distress’, through which landlords can recover rent arrears from their tenants by instructing bailiffs to seize their goods and sell them without going to court or giving the tenant in question any advance warning.

From April, landlords wishing to take control of and sell a defaulting tenant’s goods will be required to give them notice before entering the premises and only rent up to the date of this notice can be recovered. The notice period must be at least seven clear days, not including Sundays, bank holidays, Good Friday or Christmas Day.

Lukewarm reception

However, Angus Jackson from sector specialists Bruton Knowles, said the new regulations have received a lukewarm reception from the rapidly recovering commercial property sector and could make the recovery of arrears “a more time-consuming and costly process”.

“The old regime was generally regarded by landlords as a quick and efficient method of recovering rent arrears,” he said.

“The new procedure is narrower in scope and likely to be less useful to landlords than ‘distress’.

Prior notice requirement

“Landlords will be particularly concerned regarding the prior notice requirement, which could give a tenant the opportunity to move any items of value to a secure location or to dispose of them, restricting the usefulness of CRAR.

“Issues are also likely to arise in relation to where a notice must be served. It would appear that it can be served at the demised premises, at a company’s registered office or a place where the debtor tenant carries out a trade or business.

“It may be better not to serve the notice at the demised premises, in the hope that it is overlooked or the occupiers of the demised property are not notified of the enforcement agent’s visit.”

Jackson added that yet another concern is CRAR only applies to basic rent, meaning that tenants may leave insurance and service charges unpaid.