Changes to the Law on Bailiffs

Commercial Rent Arrears Recovery (CRAR) comes into force on 6th April this year abolishing the centuries old right of distress. It only applies to commercial premises. Why then is this relevant to Accountants? Whilst there are a number of technical points that the lawyers will get excited about, splitting commercial and residential leases (ie where a shop is leased with a flat above) because CRAR only applies to commercial premises, not domestic or mixed, the major changes concern bailiffs, or from 6th April enforcement agents The Major Changes From 6th April when a landlord wishes to recover rent, VAT and interest, they must give 7 clear days notice of enforcement. Sundays and Bank Holidays are excluded in the calculation. Walking Possession is replaced with Controlled Goods Agreements Notice of Enforcement must be given, where the debtor is a company, by delivering notice to either the place of business, or one of the places of business of the debtor or to the Registered Office of the Company. What is the significance of this? Where you are the registered office of a client you may well have the Notice of Enforcement served on you. Why? Well to comply with the legislation, but also as the Landlord has to give 7 clear days notice of intention to take enforcement action why not serve it at the accountant/solicitors office, where it could take a few days to come to the attention of the Company. You may for instance just post things on to your client using second class post. What Landlords and their Enforcement agents fear is that the 7 day notice period will allow debtors to move assets away from the premises they are seeking to Enforce against. There are provisions to allow an application to the Court to shorten the 7 day period. We will have to wait and see how the law develops with regard to this. What do I do if an Enforcement Notice is served? Let the client know straight away. Ask if there is a financial problem. If they need Insolvency advice contact us immediately. On a purely practical point, if the directors wish to continue to trade and need the assets (plant, machinery, stock etc ) at the business premises, they have a decision to make. If the Company is solvent just pay off the landlord. If the Company is insolvent, if the landlord takes Enforcement action they have to buy the goods back at an auction. In the meantime the business will almost certainly cease trading and they will face the prospect of having to pay for any liquidation/administration themselves. Alternatively, take immediate action either liquidation or administration and allow the Insolvency Practitioner to take steps to protect the assets. In this scenario, whilst they will still have to purchase the items they require, the costs of the insolvency will usually be met out of the net sale proceeds. If an Enforcement Notice is received by your office, pick up the phone and we can talk through the options with you.