Chapter 7: Chapter 7: Rent Arrears Recovery
126. Abolition of common law right
The common law right to distrain for arrears of rent or to levy distress to satisfy any debt is abolished.
127. Commercial rent arrears recovery (CRAR)(1) A landlord under a lease of commercial premises may use the procedure in Schedule 1 to recover from the tenant rent payable under the lease.(2) A landlord's power under subsection (1) is referred to as CRAR (commercial rent arrears recovery).
128. Landlord(1) In this Chapter, "landlord", in relation to a lease, means the person for the time being entitled to the immediate reversion in the property comprised in the lease.(2) That is subject to the following.(3) In the case of a tenancy by estoppel, a person is "entitled to the immediate reversion" if he is entitled to it as between himself and the tenant.(4) If there are joint tenants of the immediate reversion, or if a number of persons are entitled to the immediate reversion as between themselves and the tenant —(a) "landlord" means any one of them;(b) CRAR may be exercised to recover rent due to all of them.(5) If the immediate reversion is mortgaged, "landlord" means —(a) the mortgagee, if he has given notice of his intention to take possession or enter into receipt of rents and profits;(b) otherwise, the mortgagor.(6) Subsection (5) applies whether the lease is registered under the Real Property Regulations 2015 before or after the mortgage is so registered, but CRAR is not exercisable by a mortgagee in relation to a lease that would not bind a subsequent mortgagee to a foreclosure of the mortgage.(7) Where a receiver is appointed by a Court in relation to the immediate reversion, CRAR is exercisable by the receiver in the name of the landlord.(8) Any authorisation of a person to exercise CRAR on another's behalf must be in writing and must comply with any prescribed requirements.(9) This Chapter applies to any other person entitled to exercise CRAR in the same manner as it applies to a landlord.
129. Lease(1) "Lease" means a lease creating a leasehold interest in real property as described in section 1(e) of the Real Property Regulations 2015.(2) A lease must be evidenced in writing.(3) References to a lease are to a lease as varied from time to time (whether or not the variation is in writing).(4) This section applies for the purposes of this Chapter.
130. Commercial premises(1) A lease ("A") is of commercial premises if none of the demised premises is —(a) let as a dwelling under lease A;(b) let as a dwelling under a sub-lease (or sub-sub-lease, or any inferior leasehold interest) with respect to lease A ("B"); or(c) occupied as a dwelling.(2) The "demised premises" in this section include any real property on the demised premises.(3) "Let as a dwelling" means let on terms permitting only occupation as a dwelling or other use combined with occupation as a dwelling.(4) Premises are not within subsection (1)(b) if letting them as a dwelling is in breach of a lease superior to lease B.(5) Premises are not within subsection (1)(c) if occupying them as a dwelling is a breach of lease A or a lease superior to lease A.(6) This section applies for the purposes of this Chapter.
131. Rent(1) "Rent" means the amount payable under a lease (in advance or in arrears) for possession and use of the demised premises denominated as "rent" pursuant to the lease —(a) including, to the extent denominated "rent" pursuant to the lease, any sums in respect of services, repairs, maintenance, insurance, mortgage interest or other ancillary matters; and(b) together with any interest payable on that amount under the lease.(2) The amount payable for possession and use of the demised premises, where it is not otherwise identifiable, is to be taken to be so much of the total amount payable under the lease as is reasonably attributable to possession and use.
132. The rent recoverable(1) CRAR is not exercisable except to recover rent that meets each of these conditions —(a) it has become due and payable before notice of enforcement is given;(b) it is certain, or capable of being calculated with certainty.(2) The amount of any rent recoverable by CRAR is reduced by any permitted deduction.(3) CRAR is exercisable only if the net unpaid rent is at least the minimum amount immediately before each of these —(a) the time when notice of enforcement is given;(b) the first time that goods are taken control of after that notice.(4) The minimum amount is to be calculated in accordance with rules made by the Board.(5) The net unpaid rent is the amount of rent that meets the conditions of subsection (1), less —(a) any interest included in that amount under section 131(1); and(b) any permitted deductions.(6) Rules made by the Board may provide for subsection (5)(a) not to apply in specified cases.(7) Permitted deductions, against any rent, are any deduction, recoupment or set-off that the tenant would be entitled to claim (in law or equity) in an action by the landlord for that rent.
133. Intervention of the Court of First Instance(1) If notice of enforcement is given in exercise (or purported exercise) of CRAR the Court of First Instance may make either or both of the following orders on the application of the tenant —(a) an order setting aside the notice;(b) an order that no further step may be taken under CRAR, without further order, in relation to the rent claimed.(2) Rules made by the Board may make provision about —(a) the further orders that may be made for the purposes of subsection (1)(b);(b) the grounds of which the Court of First Instance must be satisfied before making an order or further order.
134. Use of CRAR after the termination or expiration of the lease(1) Subject to subsections (2) and (3), CRAR ceases to be exercisable after the expiration or termination of the lease (the "expiration or termination date").(2) CRAR continues to be exercisable in relation to goods taken control of under it —(a) before the expiration or termination date of the lease; or(b) under subsection (3).(3) CRAR continues to be exercisable in relation to rent due and payable before the expiration or termination date of the lease, if the conditions in subsection (4) are met.(4) These conditions are —(a) the lease did not end by forfeiture as determined by the Court in accordance with section 49 of the Real Property Regulations;(b) not more than 6 months have passed since the expiration or termination date of the lease;(c) the rent was due from the person who was the tenant on the expiration or termination date of the lease;(d) that person, or any sub-tenant, remains in possession of any part of the demised premises;(e) any new lease under which that person remains in possession is a lease of commercial premises;(f) that person who was the landlord as at the expiration or termination date of the lease remains entitled to the immediate reversion.(5) In deciding whether a person remains in possession under a new lease, section 129(2) (lease to be evidenced in writing) does not apply.(6) In the case of a tenancy by estoppel, the person who was the landlord remains "entitled to the immediate reversion" if the estoppel with regard to the tenancy continues.(7) On the expiration or termination date of a lease, the tenant under that lease will cease to have any further right to use or occupancy of the leased premises, except where the lease expressly provides otherwise.
135. Right to rent from a sub-tenant(1) This section applies where CRAR is exercisable by a landlord to recover rent due and payable from a tenant (the "immediate tenant").(2) The landlord may serve notice on any sub-tenant.(3) The notice must state the amount of rent that the landlord has the right to recover from the immediate tenant by CRAR (the "notified amount").(4) When it takes effect, the notice transfers to the landlord the right to recover, receive and give a discharge for any rent payable by the sub-tenant under the sub-lease, until —(a) the notified amount has been paid (by payments under the notice or otherwise); or(b) the notice is replaced or withdrawn.(5) A notice under this section takes effect at the end of a period to be determined by rules made by the Board.(6) Rules made by the Board may state —(a) the form of a notice under this section;(b) what it must contain;(c) how it must be served;(d) what must be done to withdraw it.(7) In determining, for the purposes of this section, whether CRAR is exercisable, section 132 applies with these modifications —(a) if notice of enforcement has not been given, references to that notice are to be read as references to the notice under this section;(b) if goods have not been taken control of, section 132(3)(b) does not apply.(8) In this section and sections 136 to 138 —(a) "sub-tenant" means a tenant —(i) under a sub-lease described as a "lease B"; and(ii) under a "lease A" where lease A is itself a sub-lease (below the immediate tenant) of any premises comprised in the headlease (and "sub-lease" is to be read accordingly);(b) "headlease" means the lease between the landlord and the immediate tenant.
136. Off-setting payments under a notice(1) For any amount that a sub-tenant pays under a notice under section 135, he may deduct an equal amount from the rent that would be due to his immediate landlord under the sub-lease.(2) If an amount is deducted under subsection (1) or this subsection from rent due under a superior sub-tenant, that sub-tenant may deduct an equal amount from any rent due from him under his sub-lease.(3) Subsection (1) applies even if the sub-tenant's payment or part of it is not due under the notice, if it is not due because —(a) the notified amount has already been paid (wholly or partly otherwise than under the notice); or(b) the notice has been replaced by a notice served on another sub-tenant.(4) That is subject to the following.(5) Subsection (1) does not apply if the landlord withdraws the notice before the payment is made.(6) Where the notified amount has already been paid (or will be exceeded by the payment), subsection (1) does not apply (or does not apply to the excess) if the sub-tenant has notice of that when making the payment.(7) Subsection (1) does not apply if, before the payment is made, payments under the notice at least equal the notified amount.(8) Subsection (1) does not apply to a part of the payment if, with the rest of the payment, payments under the notice at least equal the notified amount.(9) Where the notice has been replaced by one served on another sub-tenant, subsection (1) does not apply if the sub-tenant has notice of that when making the payment.
137. Withdrawal and replacement of notices(1) A notice under section 135 is replaced if the landlord serves another notice on the same sub-tenant for a notified amount covering the same rent or part of that rent.(2) A notice under section 135 served on one sub-tenant is also replaced if —(a) the landlord serves a notice on another sub-tenant for a notified amount covering the same rent or part of that rent; and(b) in relation any of the premises comprised in the first sub-tenant's sublease, the second sub-tenant is an inferior or superior sub-tenant.(3) The landlord must withdraw a notice under section 135 if any of these happens —(a) the notice is replaced;(b) the notified amount is paid, unless it is paid wholly by the sub-tenant.
138. Recovery of sums due and overpayments(1) Subject to subsection (2), for the purposes of the recovery of sums payable by a sub-tenant under a notice under section 135 (including recovery by CRAR), the sub-tenant is to be treated as the immediate tenant of the landlord, and the sums are to be treated as rent accordingly.(2) Those sums (as opposed to rent due from the immediate tenant) are not recoverable by notice under section 135 served on an inferior sub-tenant.(3) Any payment received by the landlord that the sub-tenant purports to make under a notice under section 135, and that is not due under the notice for any reason, is to be treated as a payment of rent by the immediate tenant, for the purposes of the retention of the payment by the landlord and (if no rent is due) for the purposes of any claim by the immediate tenant to recover the payment.(4) Subsection (3) does not affect any claim by the sub-tenant against the immediate tenant.
139. Contracts for similar rights to be void(1) A provision of a contract is void to the extent that it would do any of these —(a) confer a right to seize or otherwise take control of goods to recover amounts within subsection (2);(b) confer a right to sell goods to recover amounts within subsection (2);(c) modify the effect of section 127(1), except in accordance with subsection (1).(2) The amounts are any amounts payable —(a) as rent;(b) under a lease (other than rent);(c) under an agreement collateral to a lease;(d) in respect of a breach of a covenant or condition in a lease, in an agreement collateral to a lease;(e) under an indemnity in respect of a payment within paragraphs (a) to (d).(3) A provision of a contract is not void under subsection (1)(c) to the extent that it prevents or restricts the exercise of CRAR.(4) In this section "lease" does not include a licence to occupy real property.
140. Rules(1) In this section and in sections 123 to 139 "prescribed" means prescribed by rules made by the Board.(3) Rules may include any of these that the Board, having consulted the Chief Justice, considers necessary or expedient —(a) supplementary, incidental or consequential provisions;(b) transitory, transitional or saving provisions.(4) Rules may make different provisions for different cases.