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Distressed Landlords Could Miss Dated Distraint- 18/12/2008
The common law right of distraint, which has been applied by landlords of premises for years to recover rent, is likely to be abolished shortly and replaced by a statutory regime that could severely curtail landlords’ rights in this area, according to advisors at Shropshire law firm FBC Manby Bowdler LLP.
Distraint, which is the common law right to instruct certified bailiffs to enter a tenant’s premises and remove goods belonging to that tenant to pay for outstanding rent, is not a tool so readily used by Landlords during a booming economy.
But the recent slowdown in the economy and dearth of new tenants has seen more and more landlords turn to distraint to secure rent they are owed while keeping the tenant on lease.
FBC Manby Bowdler litigation partner Paul Horton explained: “Distraint is not necessarily an ideal solution as removing a tenant’s goods can spell the end of their business.
“However, it does provide a relatively cheap, quick and effective method for a landlord to recover arrears. It also allows them to test the water, ascertaining how genuine the tenant’s financial difficulties are.
“While distraint is not a tool so readily used during boom times, we’ve seen an increase in its use in recent months, which makes the possibility of this right being removed all the more worrying for landlords”
Section 71 of the Tribunal Courts and Enforcement Act 2007 states that “a common law right to distrain for arrears of rent is abolished”. While it has not yet been implemented, and the Ministry of Justice can give no dates as to when this change will take place, there is little doubt that it will.
When implemented Section 71 will impose a new satutory regime - Commercial Rent Arrears Recovery – under which landlords will have to give the tenant notice of their intention to distrain. This notice will inevitably give tenants the chance to remove goods of value from the premises.
The new regime will also limit allowable arrears to pure rent only, specifically excluding council tax, service charges, repairs, maintenance and insurance from any claims. It will also allow tenants to deduct permitted sums, such as those arising from the landlord’s failure to perform repairs.
Paul Horton concluded: “There have long been complaints from tenants that distraint is unfair, breaches human rights and does not give tenants the chance to ask courts to intervene.
“But hard-pressed landlords may complain that the new Act gives tenants a further tool not to pay their rent, and pushes them to the costlier court process to recover rent arrears. Whether practically tenants will be able to move goods with ease will of course depend on circumstances.”