THE Government’s move to shake up bailiff regulation could cause a headache for commercial landlords, according to legal experts.
New rules, applicable to England and Wales, will stop late-night visits to collect debts and restrictions on what property can be seized are being introduced. Bailiffs will also be banned from entering homes when only children are present and they will no longer be able to set their own fees. New safeguards will also prevent them from using force against people who owe money, according to the Ministry of Justice.
But Alison Oldfield, real estate expert at law firm Eversheds in Leeds, said that commercial landlords and tenants should take note that as part of the shake-up the long-anticipated new procedure for commercial rent arrears recovery (CRAR) will be coming into force. In future, commercial landlords will have to give tenants a week’s notice before sending in bailiffs, giving them an opportunity to pay, said a spokeswoman for the Ministry of Justice. At the moment bailiffs can seize goods without any warning, she said.
She added: “If the landlord believes the debtor is likely to avoid enforcement, for a small fee, they can apply to the court to reduce or waive this notice period.”
But Ms Oldfield said: “Commercial landlord will now have to serve a notice of enforcement on the tenant, giving the tenant the benefit of seven days warning before bailiffs can turn up.
“The ‘short, sharp shock’ of distress will therefore be lost and will enable tenants to remove goods from the property. The court can reduce the period of notice if there is a concern that the tenant will avoid enforcement if given too much notice, but this will increase the landlord’s legal costs.
“In the current distressed market, these changes will force commercial landlords to consider more expensive routes of recovery such as litigation or insolvency.”
Changes to the historic rules of distress were first contemplated by a review in 1998 undertaken by the Lord Chancellor’s Department, said Paul Burkinshaw, partner in Leeds law firm Clarion’s dispute resolution and litigation team. The ancient law of distress is a self-help remedy available to a landlord as soon as rent is due and unpaid.
The landlord will usually instruct a bailiff to seize goods to the value of the outstanding rent. Then the tenant will usually be invited to enter into a ‘walking possession agreement’, which allows the tenant five days, or more if agreed, in which to pay the arrears. If the tenant fails to pay, the goods can then be sold.
Mr Birkenshaw added: “One of the primary concerns is that a tenant may take steps to dispose of stocks that the landlord is aware exist during that period of notice, so preventing seizure of the same. In the draft regulation, mechanisms did exist for steps to be taken more quickly, however this would simply add cost to the landlord who is already inappropriately out of pocket.”
James Wood, partner at law firm Schofield Sweeney in Bradford, said that if tenants are warned in advance, the fear is that “valuable goods will not be on the premises by the time the bailiffs arrive”.
The Ministry of Justice spokeswoman said: “Our bailiff reforms will mean people who are owed money can still collect their debts while ensuring vulnerable debtors are protected from rogue bailiffs.”