Taking Control - Commercial Rent Arrears Recovery

The remedy of distress (an ancient common law remedy) has been abolished with effect from 6 April 2014. Distress was the landlord's right to enter leased premises without notice, to seize the tenant's goods and to sell them to recover rent arrears.

Distress has been replaced by commercial rent arrears recovery (CRAR); the landlord's statutory right to recover rent arrears. The right also extends to a landlord's mortgagees but in both cases it applies to commercial premises only.

The CRAR scheme is set out in the Government's Taking Control of Goods Regulations 2013 and we provide some further detail below.

Overview of the reliefs

CRAR does not apply to premises occupied or let wholly or in part as a dwelling. For example, the lease of a property comprising a shop with a flat is not caught by CRAR, if the flat is used as a dwelling or the lease requires it to be used as such. A property which is part-occupied by a dwelling will be caught by CRAR, if the occupation as a dwelling is in breach of the lease or of a superior lease. Which leases?

All leases of commercial property (legal or equitable), including tenancies at will are caught by CRAR. The lease must be in writing. Licences to occupy are not caught by the scheme. Tenancies at sufferance are not caught by the scheme. (A tenancy at sufferance is where a tenant continues to occupy after the lease has expired but without confirmation that the landlord is willing for the tenant to remain). What amounts can be covered?

Amounts relating only to rent paid for the possession and use of the premises (plus VAT and any accrued interest) may be recovered using CRAR. Sums in respect of rates, council tax, services, repairs, maintenance or insurance cannot be recovered under the CRAR scheme; even if these are reserved in the lease as rent (previously a landlord could distrain for these). A minimum of seven days' net rent must be outstanding. Net rent is the amount unpaid less any VAT, interest and any deductions or set-off that a tenant may be able to claim. The bailiff can only seize goods actually owned by the tenant and can only take the tenant's 'tools of trade' up to the value of £1,350. Procedure

The landlord must serve a written notice of enforcement on the tenant seven clear days before exercising the remedy. Previously, a bailiff could arrive with no notice or warning. Only an enforcement agent, authorised in writing by the landlord, can seize the goods; landlords can no longer distrain...