With the restrictions on landlords for rent recovery being extended recently once again, it is unsurprising that scepticism is beginning to bubble over whether the restrictions will be extended again. As a reminder, landlords currently cannot take forfeiture action for rental arrears, nor can they issue winding up proceedings following an unsatisfied statutory demand. Similarly, there are extensive restraints on the use of Commercial Rental Arrears Recovery. All of these options typically being the ‘quickest’ way of recouping arrears.
Not only this, landlords are now expected to adhere to a Code of Conduct relating to rental arrears. The Code requires landlords to consider rent payment holidays, concessions or abatements. Tenants are expected to be transparent about their financial position in exchange for their landlords considering such requests. The Code is voluntary, but it does seem as though reference to whether parties have complied is certainly going to be something a judge may ultimately consider.
In all of the restrictions and rules, there remains an option for rent recovery which might previously been at the bottom of any landlord’s hit list – that is, to issue a civil claim for rent.
What is the process?
Bearing in mind the voluntary Code, the first consideration should be what response has been given to a tenant who has sought rent reductions or concessions. Also, consider careful consideration should be given to the tenants financial position – if a claim were issued, could the tenant satisfy a judgment in the position they are in now? Is it in the landlord’s interest to consider a temporary reduction?
If it is suspected that the tenant does have sufficient funds and is simply refusing to pay rent, a letter before claim can be issued. If the tenant does not make full payment in say, 7 or 14 days (provided they are a company) or 30 days (of they are an individual), a claim may be issued.
The tenant then has 14 days to respond to the claim once it is served on them by filing an Acknowledgement of Service stating whether they intend to defend the claim or, accept part and defend part. If the claim is defended, the tenant then has 28 days from the date the claim is served upon them, to file a Defence.
The landlord can issue an application for Summary Judgment/Strike Out once the tenant has filed its Acknowledgement of Service. This could mean the claim could be concluded very quickly, without the need to wait until a full trial.
If the tenant ignores the claim, the landlord may instead just request Judgment in Default.
How do I enforce my judgment?
Once a judgment is obtained, which may include costs depending on the terms of the lease, it can be enforced. Depending on the value of the claim, the landlord can utilise County Court bailiffs to enter the tenant premises to satisfy the debt. County Court bailiffs’ powers are more limited than that of the High Court so consideration should be given as to whether to transfer the judgment there.
There are other recovery options which are available – however, may result in a delay in payment beyond bailiff enforcement.
What does it cost?
The Court fees relating to rental claims depends on the level of the debt. These costs are tiered up to £10,000 and will be 5% of the value of the debt over £10,000.
Applications for summary judgment will carry a fee of £255, whereas applications for judgment in default do not carry a cost.
In terms of enforcement, there are Court fees application of around £66 to obtain a writ – along with any costs charged by the bailiff.
All of the above costs will be added to the debt owed by the tenant. As will legal costs, provided the terms of the lease allow for such recovery.
If you wish to consider whether a civil claim for rent is the right next step for you, please do not hesitate to get in touch with either Lee Pearce, Joe Brightman or Molly Frankham.