Changes to rent arrears legislation, which are likely to be announced this month (October), are too much and, despite their intentions, will damage the interests of occupiers, warns Ben Hooker, Central regional head of property management at national commercial property consultancy Lambert Smith Hampton (LSH).
The Commercial Rent Arrears Recovery (CRAR) regime, enacted under the Tribunal, Courts and Enforcement Act (TCEA) 2007, proposed a dramatic rent arrears power-shift toward occupiers. However, it was never formally brought into force, meaning landlords can still instruct a bailiff to enter the premises of an occupier in arrears and ‘levy distress’ on the occupier’s goods.
With the government expected to publish the results of the latest public consultation on CRAR this month, this may change. Ben explained: “It appears likely that the old law, as it affects rent arrears, will be superseded by CRAR. Landlords may still instruct bailiffs to enter a property and seize goods – but it incorporates some ominous changes.”
These include:
· Enforceable only after seven days rent arrears become due.
· Landlords may have to give 14 days notice of enforcement.
· Rent and VAT are covered by CRAR, but service charge is not.
· Seized goods must belong to the debtor, and not just be in ‘reputed ownership’.
· No part of the property should be being used for dwelling.
“This is sledgehammer to crack a nut, enabling the occupier to remove and/or dispose of assets or use part of the property as a dwelling in order to frustrate the intent of the law. If brought into force, landlords may raise the stakes by increasing rent deposits, seeking occupier contributions towards working capital or tightening lease conditions on service charge arrears. These actions will do occupiers no favours whatsoever,” added Ben.
All that is required is a change to the existing legislation on recovery of commercial rent arrears. Ben added: “The occupier’s primary objection to the current law is that a bailiff may be instructed as soon as the debt arises. By simply legislating for more time before bailiffs can make entry, there would be no need for CRAR. The Government needs to listen and change course – for the sake of occupiers and landlords alike.”
LSH’s Central region includes Birmingham, Coventry, Wolverhampton, Nottingham, Leicester, Northampton, Luton, Cambridge and Milton Keynes.