Article

Commercial Rent Arrears Recovery

The European Convention introduced by the Human Rights Act 1998 is indirectly giving rise to changes in areas of the law not specifically covered by the Convention, but where the State considers that compliance with it requires improvement of existing laws. The Tribunals, Courts and Enforcement Bill has been introduced with the intention of abolishing the ancient common law right of landlords to distrain on the tenants' goods for arrears of rent. At present distraint is a useful and speedy remedy for landlords of commercial premises and is regularly used as a shot across the tenant's bow to persuade a defaulting tenant to pay the current arrears and all future rent on time. No advance warning is required
to be given, to avoid the risk that the bailiff will otherwise find nothing of value at the demised premises other than the tenant and his or her spouse (whom the tenant might gladly hand over). Further,
modern commercial leases reserve as rent not only the amount payable for the tenant's occupation but also service charges, insurance premiums, Vat, interest, etc. The landlord then has the option of distraining for all payments reserved as rent. If the Bill in its present form receives Royal Assent, distraint will be abolished and commercial landlords will have to adopt a procedure called
Commercial Rent Arrears Recovery ("CRAR"). This procedure will apply to rent payable for possession and no other payments such as service charges, etc, even though they may be reserved as rent. In
relation to these other payments the landlord must use other remedies, such as debt recovery proceedings issued by the Court and/or forfeiture action. The CRAR procedure allows the tenant to
make deductions for sums the tenant claims are due from the landlord, e.g. set-off for landlord's breach of repairing obligations. Accordingly, the clause commonly found in leases providing that rent
is payable without deduction etc, will no longer be effective. In addition there will be a notice procedure that must be followed, thus eliminating the element of surprise and possibly the number and
nature of the goods found at the premises. The Court will have the power to intervene, if asked by the tenant and to decide whether CRAR is applicable and whether its procedures have been complied
with. The Court may in the case of a dispute suspend the use of CRAR, pending resolution of that dispute. The Bill may be amended as it passes through Parliament, but in its current form it provides an
indication that the seizure and threatened sale of tenant's goods will almost certainly become less of an effective remedy.

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