Commercial Landlords must be aware of changes to the law which will transform the way they collect outstanding rent, an expert has warned.
Daniel Long, Commercial Property Dispute Resolution Solicitor at Woodcocks Haworth and Nuttall, warns that from April 6 a new procedure known as Commercial Rent Arrears Recovery (CRAR) will replace the former right to levy distress where a commercial tenant is in arrears of rent.
Currently Landlords are able to instruct certificated bailiffs to pursue tenants for outstanding rent and seize goods if payment is not made within a short period. This has historically been a quick and cost effective remedy for Landlords.
However, from April 6, a minimum of seven days’ notice in writing must be given before Landlords can use the new CRAR process. In addition, Landlords will only be able to take control of goods where premises are purely commercial and only in relation to pure rent. No longer will landlords be able to take control of goods where there are arrears of service charge or insurance, even where they are reserved as rent under the lease.
The new rules could allow for a greater period of negotiation between Landlord and Tenant but there is growing concern amongst property owners that Tenants will simply use this to their advantage. Without the element of surprise, tenants will from April 6 be able to dissipate assets from their premises upon receipt of the warning notice.
Daniel commented: “Part of the effectiveness of using a bailiff has been its immediacy but with the new rules, the debtor will be aware the bailiff is attending and may seek to remove or dispose of goods prior to the visit.
“Whilst it will be possible to apply to the Court for this notice period to be shortened where the creditor believes the that goods might be removed or disposed of, it is not yet clear how this will work in practice and inevitably this may result in added costs to the creditor.
“There is an obvious need to strike a balance between the responsible recovery of arrears and the ability to ensure that commercial landlords are able to recover payment due but with an ever-changing legal landscape, gaining early advice is key.
“I am expecting to see an increased use of other remedies such as recovery from third parties, drawing from rent deposits, issuing court proceedings and insolvency proceedings.
“There will need to be greater due diligence before entering into new leases and Landlords should look to maximise their protection in leases as best they can with rent deposits and guarantors. Landlords should take care moving forward with all-inclusive rents and mixed use premises.”
To find out more about your rights regarding this complex area of the law, call the experts on 0161 761 4611 or email Daniel Long (email@example.com.)