Will landlords look to increase rent deposits to protect themselves ahead of changes in the law?

Changes to the law, anticipated to come into effect in 2014, will allow entry to commercial premises only under conditions for the seizure of goods as part of a new regime of Commercial Rent Arrears Recovery (CRAR).

For many years, one of the most effective remedies available to a landlord when a tenant goes into arrears is levying distress for rent - in other words, sending in bailiffs to seize and sell goods in satisfaction of the arrears.

However, there has long been discussion about whether the power to distrain for rent (to seize the property of (a person) in order to compel payment of debts) should be abolished, and following a review on the enforcements of civil judgments, part 3 of the Tribunals, Courts and Enforcement Act 2007, when brought in to force, will contain provisions that deal with the replacement of the remedy of distress.

This legislation will allow entry to commercial premises and the seizure of goods under conditions, which amongst others are:

  • 7 days notice must be given by the bailiff of any enforcement action, although the landlord may apply to court to shorten the notice period. This raises the obvious concern that tenants will use the notice period to dispose of goods that otherwise might have been seized;
  • bailiffs may not enter a property where there are children or after 9pm;
  • CRAR can only be used for ‘pure rent’ collection (not including service charges, for example); and
  • entry by the bailiff must be by door and it will no longer be possible to access a property through an open window or skylight.

The implementation of this legislation has been delayed by continuing consultation, in order to allow the regulations to be produced and for there to be supporting Court rules developed.  It is now thought that amendments will be underway during the summer of 2013 with the measures possibly coming into effect in 2014.  These changes will no doubt prove challenging when looking to recover rent arrears and resultantly, what may be seen in giving landlords alternative pre-emptive protection, is an increase in rent deposits and an increased requirement for guarantees on the initial grant of a commercial lease.

This article has been written by Cate Rosser, Associate, and Ness Kibble, Trainee Solicitor at Trethowans LLP.