Law of Distress Abolished

The Ministry of Justice has recently confirmed that the law on distress will be abolished.

Whilst the law of distress is considered by many to be anachronistic, it has nonetheless proven a very useful tool for commercial landlords over the years. The proposed changes will undoubtedly make life more difficult for landlords seeking to recover rent arrears, as it may give tenants an opportunity to remove goods prior to them being seized and/or enter into insolvency prior to the date of entry.

In place of distress, Commercial Rent Arrears Recovery (CRAR) will be introduced and will allow a landlord to enter and seize goods but on the following conditions:

• It can only be used in respect of “pure” rent arrears cases (i.e. excluding sums reserved as rent such as service charge and insurance).
• The current proposal is that CRAR will only be available where there are at least seven days’ rent arrears.
• The landlord must first serve an enforcement notice on the defaulting tenant giving it seven days’ notice.
• Following expiry of the notice period, the agent can then enter the premises and remove goods.
• The landlord will be able to apply to Court to shorten the notice period.
• Where the enforcement agent has concerns that the tenant will remove goods to avoid enforcement, the agent will be able to secure the premises.
• The minimum period before sale will be 7 days from removing the goods unless the goods would become unsaleable or their value would be substantially reduced.

The changes will be achieved later in the year by implementing Part 3 of the Tribunals Courts and Enforcement Act, which received Royal Assent back in 2007 but is not yet in force.

We will provide an update when the reforms are brought into effect but in the meantime if you require any advice on recovery of rent or other sums due from Tenants please contact Richard Forskitt on 01604 609560.