The Importance Of Distress As A Remedy For Commercial

There are a number of options available to commercial landlords where rent is in arrears:

pursue a guarantor; serve a statutory demand; issue county court proceedings; forfeit the lease; levy distress. When levying distress for rent, a landlord is entitled to enter their tenanted property and seize goods found at the property until rent is paid. If the rent is not paid then the landlord has the power to sell the goods and apply the proceeds to discharge the rent arrears.

Distress is almost always only levied where there are commercial tenancies. Distress is a remedy dating back to medieval times, which is governed by numerous complex requirements and rules. It is therefore important for landlords to take appropriate advice before levying distress.

In an effort to modernise the rent recovery process, distress is expected to be abolished and replaced instead with the Commercial Rent Arrears Recovery (commonly referred to as 'CRAR') procedure.

Whilst we await the introduction of CRAR (not expected until 2014 at the earliest), distress remains a useful remedy for landlords, and the Property Litigation department of Charles Russell LLP has recently acted on behalf of a landlord in a case which particularly emphasised the importance of distress where tenant companies become insolvent.

The Facts

In the case of Warrant Securities Ltd ("Warrant") v TFW Limited ("TFW")and Greatrix, Warrant let commercial shop premises in Southampton to TFW. In early 2011, TFW was experiencing financial difficulties and the quarterly rent payment due on 25 March 2011 was not made.

In April 2011 Warrant instructed a certificated bailiff to enter the property and levy distress. TFW had been operating as a furniture shop from the property and accordingly various items of furniture were seized. A Walking Possession Agreement was entered into (meaning that the items were impounded until the rent was paid but would be left at the property).

TFW's financial situation worsened and the company ceased trading from the propertyshortly after distress was levied. Mr Greatrix subsequently instructed the employees of TFW to clear the property and the furniture that was the subject of the distress was also removed.

A person or company who knowingly removes or disturbs distrained assets without permission of the distrainor may be guilty of poundbreach and liable to reimburse the distrainor in treble damages (three times the value of the goods under distraint). Warrant accordingly...

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