Landlords who have tenants experiencing a financial rut usually impose distress over the goods the tenant owns. These property owners would freely come inside the premises and seize goods they find inside.
A bailiff company such as MS Webb & Co. would then offer solutions for business rescue in such cases. This is why most tenants typically acquire moratorium to protect themselves.
Nevertheless, there are times when a moratorium will not be enough to preserve the assets of the tenants. This began when courts viewed an agreement on walking-possession to permit the landlord security rights.
Last April 6, 2014, the UK replaced the distress for rent remedy with a new constitutional tool called Commercial Rent Arrears Recovery (CRAR). Below are the major differences between the two.
Before they replaced distress, landlords were able to impose it on their properties that consisted of commercial and residential uses. With CRAR, they can only levy this over assets at “commercial premises” or on cars the tenant owns parked along public highways.
Lease or Rent
Distress only needed the existence of a relationship between the tenant and property owner without requiring a lease agreement in writing. To qualify for CRAR, they must have the tenancy proved in writing.
Back then, they did not require a minimum arrears level to impose distress. Now with CRAR, they must wait for an outstanding rent of seven days at least.
The CRAR process limits the retrieval of arrears only to “basic rent,” including VAT and interest. It is not similar to the distress rule that allowed property owners to obtain any quantity due in the lease characterised as “rent.” This one includes rates, service charge and insurance payments.
CRAR offers a better chance for solvent tenants to come to a practical agreement concerning arrears. This prevents a possible disruption to the business enforced by the levying of distress.