New commercial rent arrears recovery process to be introduced from April 2014

Commercial Rent Arrears Recovery (CRAR) will replace the common law right to 'distress for rent'. It will only be available in respect of unpaid rent, to include VAT and interest but not related costs such as service charges and insurance. Landlords will not be able to use the remedy where the property or any part of it is being used for residential purposes, unless this is in breach of the terms of the lease.

"These changes have been a long time in coming, and will be welcomed by tenants," said property litigation expert Alicia Foo of Pinsent Masons, the law firm behind Out-Law.com.

"From a landlord's perspective, though, the ancient but highly effective remedy of 'distress', which CRAR replaces, will be rendered very much toothless by these changes," she said.

Part 3 of the Tribunals, Courts and Enforcement Act, which received Royal Assent in 2007, set out the CRAR regime as a replacement for distress for in rent arrears cases. The current remedy allows a landlord or certified bailiff, acting on the landlord's behalf, to enter leased commercial premises occupied by a defaulting tenant and remove and sell goods owned by that tenant up to the value of the rent arrears. This effectively allows a landlord to recover rent arrears without initiating court proceedings.

The new system will introduce a requirement for the landlord to serve a "notice of enforcement" on the tenant before becoming entitled to send in enforcement agents. The final regulations confirm that a seven day notice period will apply, reduced from the Government's original proposal for a 14 day notice period in CRAR cases. This is intended to reflect concerns from landlords that the notice period provided time for debtors to "abscond or remove goods" before CRAR could be enforced, according to the Government's response to its original consultation on the changes. The court will also be given the power to order a lesser period of notice where it is likely that the debtor will move or dispose of goods to prevent enforcement.

Landlords will not be entitled to use CRAR against a tenant unless the outstanding amount is equal to or greater than seven days rent arrears, as proposed by the Government in its original consultation. This is a higher threshold than the one day minimum that currently exists, despite concerns raised by some respondents to the consultation that this would not be appropriate in cases where the debtor was on the verge of insolvency.

CRAR will be introduced alongside new laws intended to protect the public from "aggressive bailiffs", Justice Minister Helen Grant announced. Once the changes are in force, bailiffs will no longer be able to seize property for residential rent arrears without going to court. They will be prevented from entering wholly residential properties between 9pm and 6am or when only children are present; and will not be able to take basic household items, such as cookers and washing machines, to satisfy a debt.

"There are some very good, reputable bailiffs around, but we know there is bad practice out there that needs to be dealt with," the Justice Minister said. "These laws will help to clean up the industry and ensure bailiffs play by the rules. They will also make sure businesses and public bodies can collect their debts fairly."

Further regulations which will introduce mandatory training and certification for bailiffs, as well as set costs for the industry, will be published later this year, she said.