Bailiffs’ curbs put squeeze on landlords over leases

Yorkshire’s commercial property landlords are being urged to review their leases ahead of new legislation curbing bailiffs’ powers next month.

Commercial Rent Arrears Recovery (CRAR), which is due to come into effect on April 6, replaces the ancient common law of distress which allowed bailiffs to seize and sell goods to recover rent arrears without warning.

Chartered surveyor Eddisons, which has offices in Leeds, Bradford and Huddersfield, said that under the new law landlords will only be able to recover unpaid rent via enforcement agents (formerly bailiffs), but not service charge, insurance and other monies even if classed as ‘rent’ under the lease.

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Jay Rutter, Eddisons’ head of commercial property management for Yorkshire, urged commercial landlords to review any service charge and insurance arrears that are already overdue or are likely to become overdue shortly after the next rental quarter date of March 25. “Landlords may need to consider taking bailiff action prior to April 6 to protect their position,” he said.

The new law also bans enforcement agents from taking action on residential elements of a mixed-use lease, raising potential problems for shops, offices or pubs with domestic accommodation on the same lease.

In cases of mixed tenure, Mr Rutter advised landlords in the process of granting new leases to divide, where possible, the commercial and residential elements into separate leases ahead of April 6. This would allow them to use an enforcement agent on the commercial part in the future; otherwise their only options would be to seek repossession through the courts or pursue insolvency action.

CRAR gives tenants more notice that action will be taken. Landlords will have to give tenants seven days’ notice before enforcement agents can take control of goods – and they can only instruct enforcement agents when at least seven days’ rent is outstanding.

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A Controlled Goods Agreement will be introduced that has to be signed by the tenant before any item can be removed. Mr Rutter said: “Part of the effectiveness of using a bailiff in the past has been its immediacy and shock value. Tenants don’t relish being blacklisted and in a case where the landlord owns many adjoining properties, like a shopping centre, it can send out a clear message to all the other leaseholders.

“The new system, however, does allow for a greater period of negotiation between landlord and tenant, which may ultimately avoid the premises being left empty.”