Friday, 1 May 2020

COVID-19: Taking Control of Goods

The new regulations* governing the taking control of goods announced by the government in its press release on 23 April have now been passed.

I describe the press release in my previous blogpost.

Here’s how the new regulations affect commercial rent arrears recovery (CRAR).

CRAR is a means of enforcing the recovery of rent arrears at commercial property which replaced the old remedy of distress in 2014.

If rent remains unpaid after a landlord serves notice, the landlord can instruct an enforcement agent to recover the arrears by seizing control of the tenant’s goods and selling them at auction.

CRAR can only be used to recover the principal rent plus interest and VAT. It can’t be used to recover other arrears, such as service charge, insurance and dilapidations.

The 2020 regulations make the following changes.

·       The new regulations increase the minimum amount of net unpaid rent that must be outstanding before CRAR may take place from 7 days’ rent, under the previous rules, to 90 days’ rent. This increase lasts while protections from forfeiture for business tenancies are in place under the Coronavirus Act 2020.

·       Normally, enforcement agents are not permitted to take control of goods more than 12 months after the notice of enforcement is given, unless the court extends the period. Under the new regulations, an automatic 12 months extension is given where less than one month was remaining when the lockdown restrictions were imposed, or that point is reached while they are in force.

·       The new regulations automatically extend, for a period of six months, enforcement agents’ certificates in cases where these are within 3 months of expiry, while the coronavirus restrictions are in place.

·       The new regulations prevent enforcement agents taking control of goods at residential premises or on highways while the lockdown restrictions are in place.

Although the government has brought in significant restrictions on the methods of enforcement open to landlords where there are rent arrears during the coronavirus restrictions, in the absence of specifically agreed concessions or waivers, those amounts remain contractually due.

As things stand, once the restrictions are over, landlords will be able to resort to all the usual methods of enforcement if arrears remain outstanding.

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