Commercial property landlords are being urged to tackle any rent arrears issues ahead of new legislation coming into force from April 1.
Michelle Bonning, credit control manager at property group CPBigwood, warned that left unchecked it would likely prove much harder to recoup what was owed.
She warned: “They need to act now and sort their situation out especially if it involves unpaid service charge or insurance bills.
“Otherwise the revenues could be lost – it is as stark as that.”
Part of the Tribunals, Courts and Enforcement Act, the big change is the abolition of the ability to distrain for unpaid rents – a Common Law remedy for landlords of commercial property allowing them to seize assets belonging to the tenant to sell so as to recover rent arrears.
The landlord does not need any court order to do so once the rent has become overdue albeit some items are exempt from seizure including those belonging to third parties and on hire purchase agreements, tools of the trade and perishables.
The system is being replaced by CRAR – Commercial Rent Arrears Recovery.
If the landlord wants to use CRAR, he will have to give the tenant seven days notice of enforcement.
Once notice has been served, the tenant may apply to court for a set aside or delay of execution.
There will have to be a written lease in place to use CRAR.
And items not directly attributable to the tenant’s possession and use of the premises, such as services charges, will not be recoverable.
Unlike under distraint, only certificated bailiffs will be able to seize goods, not the landlord.
“If you have arrears of rent, now is the time to address the matters,” said Ms Bonning. “And that is particularly pertinent if the arrears largely consist of service charges and insurance.
“Landlords will be concerned that tenants will use the notice period to dispose of the goods or stock that might be recovered or to remove them from the premises. Tenants might also use the interval to commence the insolvency process.
“Tenants will be happy at the shake-up but landlords may well be hit in the pocket.”
CPBigwood has seven offices in Birmingham, Stratford-upon-Avon, Henley-in-Arden, Shepshed, Eastleigh in Hampshire, and London.