Distraining for rent can be a very effective remedy to recover unpaid rent when a tenant is in default.
Most commercial leases provide a landlord with the right to re-enter premises and terminate a lease if rent is due but unpaid. A lease will often provide that this right arises if rent is unpaid for longer than, say, 14 days or 21 days. However, exercising a right of termination does not give a landlord the ability to go into the premises and sell goods, plant and equipment owned by the tenant in satisfaction of the outstanding rent.
A distraint for rent may be a better alternative to terminating the lease.
Distraining for rent is not a process issued in a court. The procedure is regulated by Part 2 of The Landlord and Tenant Act. The process is straightforward. A Warrant to Distrain is prepared. The Warrant authorises a process server to attend at the premises to distrain the goods in the premises on behalf of the landlord. The Warrant to Distrain will stipulate the amount of rent outstanding. It should be noted that distraint can only occur for unpaid rent. It cannot occur for unpaid outgoings or other costs and interest.
The Warrant to Distrain is signed for and on behalf of the landlord. Accompanying the Warrant to Distrain is an inventory whereby the process server certifies that a distraint had taken place at the premises for the unpaid rent. It is also common to include an amount of costs of the distraint as part of the total claim. These costs will include costs of the preparation of the Warrant, together with the process server’s costs. The Inventory has a Schedule of Goods which is completed by the process server. The distraint is then posted on the premises or handed to the tenant.
A distraint can only occur between the hours of 6.00am and 6.00pm.
Distraining for goods, including plant and equipment etc ultimately allows those goods to be sold at public auction in order to recoup the unpaid rent and costs.
If goods or plant and equipment in the premises are owned by another party, then that other party can provide a declaration as to their ownership and those goods must then be released to that other party.
Five days after the distraint, if the full amount of the rent and costs has not been paid, then the landlord has the right to sell the goods at auction for the best price that can be obtained.
Sometimes, a landlord will terminate a lease at the same time as the distraint is taking place. However, it is important to note that the distraint must occur before the lease has been terminated.
There may be issues arising in which a distraint may not be possible, particularly if a company is under a Deed of Company Arrangement or under administration. There may also be issues arising if the tenant has given security over its assets in which there are secured creditors involved.
However, subject to some of the complexities that arise in the case of insolvency or where goods are subject to a registered security, distraining for goods can be an effective remedy to recover unpaid rent.
DW Fox Tucker is able to advise on all aspects of distraining for rent.
