The Taking Control of Goods Regulations 2013 - The Death of Distress?

Explore:  CRAR Goods UK

The common law right to levy distress has long been considered by commercial landlords as a quick, simple and cheap self-help remedy to recover rent arrears. But this right will soon be abolished and replaced by a new remedy, known as CRAR, which stands for “commercial rent arrears recovery”. The likely date for implementation of CRAR is 6 April 2014, when the Taking Control of Goods Regulations 2013 will come into force.

CRAR – the main provisions

The CRAR legislation is comprehensive and detailed. Landlords will need to take care not to fall foul of the new regime when seeking to exercise the right to recover rent arrears from 6 April 2014. The main provisions are:

  • CRAR is only available to landlords of commercial premises and the lease must be in writing for it to apply. 
  • A lease is not of commercial premises if the property (or any part of it) is let or occupied as a dwelling. 
  • CRAR can only be used to recover arrears of annual rent, VAT and interest. Other arrears, for example service charge, insurance or rates, cannot be recovered using CRAR, regardless of whether they are reserved as rent under the lease. 
  • Before exercising CRAR, 7 clear days notice of enforcement (containing certain, specified information) must be given to the tenant. 
  • Certain goods will be exempt from CRAR, including goods that are necessary for the tenant’s business (up to the value of £1,350) and goods owned by third parties (including sub-tenants).
  • A minimum threshold amount of 7 days rent (less interest, VAT and any deductions or set-off which the tenant is entitled to make) must be in arrears before CRAR is exercisable. 
  • Only certified enforcement agents will be able to take control of a tenant’s goods and sell them under the CRAR regime.
The death of distress?

The implementation of CRAR will bring to an end, in both name and current procedure, the right to levy distress. Although CRAR will still allow landlords to take control of and sell goods belonging to defaulting tenants, savvy tenants may seek to put their goods out of the landlord’s reach upon receiving a notice of enforcement, or instead pay off the debt so as to reduce it to below the minimum threshold amount. To avoid this risk, and the added administration under CRAR, it seems likely that landlords will look more at using rent deposits and guarantors as additional security when leases are granted.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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