A guide to Commercial Rent Arrears Recovery

Landlords need to be careful with the collection of rent arrears from commercial tenants now that the landlords self help remedy of distraint – where the landlord was entitled to seize goods belonging to the tenant to pay rent arrears –  has been abolished.

With Commercial Rent Arrears Recovery, the landlord now has to abide by detailed provisions and procedural steps to take possession of the tenant’s goods at the demised premises.

In order to seize tenants goods there must be a lease must be in writing. Only rent arrears are recoverable under this procedure and not other amounts due under the lease even if reserved as rent. Rent must be at least 7 days in arrears. The Landlord must use an enforcement agent – a certified bailiff.

There is now a requirement to give the Tenant not less than 7 clear days notice of the Landlords intention to attend the property to take control of the goods.

  • The notice has to contain certain prescribed information in order to be valid.
  • A fresh notice must be served to re-enter the premises
  • Even once served the tenant can apply to the court to set aside the notice.
  • Once goods have been seized, the tenant must be given an inventory of those goods as soon as reasonably possible.
  • The seized goods need to be valued within seven days and then sold for the best price that can reasonably be obtained.

These provisions are proving unpopular with Landlords are there is the requirement to give the Tenant not less than 7 clear days notice of the Landlords intention to attend the property to take control of the goods.

However the landlord must be cautious and avoid any act of that could be in contravention of the procedure or it could face action from the tenant.

Clearly the biggest disadvantage to this procedure is the clear risk that the there are some serious disadvantages for landlords.  Evidence already suggests that tenants are removing goods from the demised premises out of reach of the landlord during the notice period, all but rendering this form of enforcement useless.

Due to the new notice requirement there is a delay from the point that the rent falls due and the enforcement agent selling the tenant’s goods which could span a number of weeks.

With such obstacles in the Landlord’s way, other methods of obtaining the rent from the tenant may be more successful for the landlord.

Landlords have the option of using statutory demands, bankruptcy or winding-up petitions to the tenant quickly prioritises the payment of rent. Although winding-up or bankruptcy petitions won’t be appropriate if amounts are disputed in most instances this will not be the case with rent arrears. The threat of the cessation of a tenant’s business by taking such steps ought to be considered by landlords where other enforcement remedies lack teeth.

Landlords need to consider pre-emptive measures at the outset of the relationship that help to insure against the non-paying or persistently late tenant. The prudent landlord should consider obtaining rent deposits (or larger ones) and personal guarantees if appropriate.

 

If you are needing legal advice on Commercial Rent Arrears Recovery, get in touch with us for a no obligation discussion about your circumstances.