The current legislation surrounding the recovery of commercial rent arrears is changing on 6 April 2014 with the introduction of a new statutory regime. The new regime may come as a welcome relief for some retailers although the extent to which it will help financially distressed retailers is yet to be seen.
‘CRAR’ is the abbreviation given to the new Commercial Rent Arrears procedure. Under CRAR, landlords will see significant changes to the methods of recovering arrears and significantly, landlords will no longer be able to exercise their archaic right to distrain against a tenant’s goods.
Under the current rules, tenants are at risk of bailiffs turning up to distrain against goods without prior notice. Whilst this can enable the landlord to recover arrears of rent and other sums which have fallen due, it often leaves tenants unable to trade and accordingly can be the precursor to administration or other financial difficulty.
Whilst the 7 days advance written notice of the landlord’s intention to implement CRAR may not be long enough for tenants to pay the amounts owed, it does however provide tenants with a window of opportunity to seek advice on the options available to them which may include restructuring. Directors of tenant companies should use this time frame to seek professional advice in order to minimise the risk of breach of duty claims by creditors.
For more information about any of the issues raised in this article, please contact Katherine Breckin at firstname.lastname@example.org.