For landlords and those supporting and advising them, the regulatory landscape for being able to manage their property portfolio has been completely and utterly squashed. But there is hope. First and foremost a vaccine for COVID-19 has been found which up until a few weeks ago seemed an age away. With a new year nearly upon us, and several vaccines “in the freezer” so to speak, landlords can turn their minds to what options they do have now and in the medium term to take back control of their assets.
In our experience as both lawyers, Sheriffs, and now High Court Enforcement Officers, the Writs of old – now called Writs of Control and Writs of Possession have a lot to offer landlords as a way out of the current crisis. The term “Writ of Execution” seems like a Middle Earth term, as it originates deep in the history of the English common law, and even today, the issue of a Writ from the High Court will often lead to quick and robust enforcement action. In the aftermath of the pandemic a Writ they can come to the aid of beleaguered landlords and those that advise them.
Recovering commercial rent arrears under CRAR and Writ of Control
Commercial landlords have always had the right to distrain for rent, and since 2014 this process has been updated into taking control of commercial tenants’ goods under the Commercial Rent Arrears Recovery procedure (CRAR) laid down in the Taking Control of Goods Regulations 2013. But that remedy is currently offline the moment except for very limited situations, and it seems that landlords are not keen even in these limited circumstances to use this option when they can.
Bearing in mind that the current regulations forbidding the use of CRAR will now stay in place until the end of March 2021, landlords may find that a claim for ALL the sums due from their commercial tenant, being both rent and non-rent items, along with interest, can be wrapped up in a money claim, and issued on the Money Claim Online website for a sum under £100,000. There is little room for a Defence to a claim for rent under a Tenancy Agreement and so judgment can be reached in as little as 19 days from the date of the claim being issued. At that point, an application to transfer the judgment to the High Court can be made for any judgment (including costs and interest) which is valued at over £600.
High Court Enforcement Officers will gladly accept judgments and transfer them for landlord creditors and their advisors and turn the county court judgment (CCJ) into a High Court Writ of Control. High Court Enforcement teams are visiting addresses, both commercial and residential to take control of goods and will continue to do so until normality returns to business life. The Lord Chancellor himself has written to the High Court Enforcement Officers Association acknowledging that the enforcement of court judgments is an important part of the administration of the justice system. As a result, quietly and discreetly, the age-old process of seizing goods, and taking them into legal control to create leverage for the creditor continues and supports landlords as an almost identical enforcement process to a CRAR instruction.
For Commercial Landlords with more than 276 days of outstanding rent they can still utilize the Commercial Rent Arrears Recovery procedure known as “CRAR”. The number of days for outstanding rent will increase on the December quarter day to 366 days i.e. rent going back for more than a year. Use this link to work out if you cross the threshold of days – see https://bit.ly/2WMX. For many landlords rents up until the December quarter day 2019 will have been paid, so this restriction will stop them from collecting rents due on the March 2020 quarter day and for the rest of this year.
This is why CRAR remains unattractive, but a money claim, with a judgment entered for any amount and for any period, is the best alternative at the current time, and certainly until the situation on CRAR returns to normal functionality.
Either way, if a commercial landlord has a valid CRAR instruction or a CCJ for the amount due against a tenant, then the good news is that High Court Enforcement Officers will action that instruction and attend at the relevant premises of the tenant without delay. Whilst much of the legal system is in a state of “backlog” the same cannot be said of High Court Enforcement Officers and their agents who are eager to get out and enforce any instrument which is capable of enforcement despite the current restrictions.
Combining the writ of control with a writ of possession for commercial premises
Using a Writ of Control to Collect in Rent from Residential Tenants - For both tenants in situ and former tenants, the option to pursue a money claim for outstanding rent and any other sums due to the landlord is available using the same approach – a money claim. Again, one of the consequences of the COVID crisis is going to be the backlog in the civil court system for claims for possession and rent through PCOL and the normal claim process. Landlords also have the added burden of being seen as “the Goliath” in any given situation and Government policy reinforces this view, by taking away the traditional methods of enforcement at the current time.
Political decisions are not going to help landlords in the short to medium term. So instead of getting snarled up in this inevitable delay, landlords can take positive steps to secure their position by deciding to go the “money claim” route, unless their claim for arrears falls into one of the limited options for particularly bad tenant behavior – in which case they can go down the issuing a possession claim route.
For claims relating to rent and other payments, then a landlord can follow the normal pre-action debt protocol route of writing to a tenant outlining the claim and giving the tenant 30 days (for non-business tenants) or 14 days (for business tenants) to pay the amount due, as well as putting the tenant on notice that a claim will be issued. Claims up to £100,000 can be issued on Money Claim Online, and again the risk of a Defence being received is low due to the fact that the tenancy agreement is a contract that confirms the obligation on the tenant to pay rent and any other contractual sums.
Once a claim is issued and assuming a tenant has no Defence or Counterclaim to that claim, a landlord can enter judgment for the claim amount, along with fixed costs and interest, within 19 days of issuing the claim. The county court’s judgment (CCJ) is then itself enforceable. There is no right to possession under such a claim. However, a CCJ becomes registered immediately on being made and a defendant has one month to pay the CCJ or risk having it stay on his credit file for 6 years. The impact of this on any tenant is significant because unless it is paid within this one-month window, it will always show up on any application for credit – be it a car lease, credit card, store card, or mortgage. Once the one-month window to pay passes it stays on the file regardless of settlement for 6 years. Landlords should use this fact to encourage payment in full or in a workable payment plan from the time they start out on this strategy.
For some people, the idea of having a blot on their credit file in terms of an adverse entry will be enough to push them into paying what is due or setting up a sensible and sustainable payment arrangement. For others – what we might call the WON’T PAY tenants, then the next step is to transfer the CCJ to the High Court for enforcement.
Commercial landlords – High Court Enforcement
Landlords are not without remedy – it’s just that they should change tack during the period while their traditional enforcement routes are offline.
Commercial landlords and landlords of residential housing can transfer a money judgment over £600 in value to the High Court and arrange for the tenant (now Judgment Debtor) to be visited by High Court Enforcement Agents. Whilst entering a dwelling house for the purpose of enforcement is off limits at the moment, but there’s no reason why a car on the driveway can’t be taken into legal control, and if necessary uplifted and taken to auction.
There is no moratorium against this type of action, and High Court Enforcement Officers are now being guided in direct communications from the Lord Chancellor himself. High Court Enforcement Officers and their agents have been told quite plainly that they can attend business premises in all Tiers to enforce High Court Writs of Control.
Of course, whilst this sounds all very positive in a written article, landlords do find themselves having to balance their actions, against keeping a good tenant in a property until the COVID crisis has passed, but one wonders how long landlords can hang on being passive without taken any action to secure their position.
Mediation or Litigation?
For landlords who are anxious to keep their tenants in place in the longer term, then the opportunity to meditate on a plan for payment should be considered as a way forward. A trained mediator will bring the parties together in a controlled setting (usually on ZOOM or TEAMS) to help them achieve an agreed settlement. There is a process for this, but it is certainly an option when set against the cost of upsetting a good tenant and minimizing angst, as well as avoiding the cost of protracted litigation.
Don’t Forget Forfeiture
Forfeiture is all but “off the table” for commercial landlords as an option to bring a tenancy to an end for non-payment of rent. However, it is allowable under The Coronavirus Act 2020 where the forfeiture relates to a breach of rental obligations other than the payment of rent. Again, landlords will be weighing up the pros and cons of whether to serve notice to bring the tenancy to a close for any such breach. The saying “better the devil you know” comes to mind before junking a good tenant for a minor breach over the longer-term need for sustainable payments.
Possession is 9/10ths of the Law but Not in a Pandemic
Writs of Possession will be a much-needed enforcement remedy in the weeks and months ahead as HMCTS pulls itself out of the backlog it is going to face in processing claims for possession and then enforcing these as quickly as possible.
We encourage all residential landlords on the point of issuing proceedings, or having hearings before the Court NOW to include the following “magic” words in their Claim for Possession:
"AND the claimant intends to make an application for leave to have the matter transferred to the High Court pursuant to section 42 of the County Courts Act 1984 for enforcement"
This wording allows a District Judge the discretion to grant an Order in these terms so that a landlord may transfer the county court’s possession order to High Court for enforcement when restrictions against evictions involving dwelling houses are relaxed. That may be still some weeks away, but we encourage landlords to use the time now to plan for a spring revival in their fortunes so that claims that they issue now are ready to be enforced as the public health situation improves. An Order containing this wording does not preclude a landlord from not enforcing or keeping the enforcement in the County Court. It simply gives the landlord an alternative option to the county court Warrant of Possession.
If a possession claim has already been issued, then we suggest that submissions are made at the close of any hearing for the same wording to be added to the draft Order for approval by the District Judge.
If a possession order has been made, then there is still scope for an application to be made to allow the enforcement of a county court possession order to be made in the High Court. However, a landlord will have to make out a stronger case for why the transfer is needed and be ready to explain the impact of the pandemic on his or her finances. A fee will be payable on making this application and you will have to explain in a supporting Witness Statement your reasons for taking this step. However any application, after a Possession Order has been made, offers a lower chance that a judge can be convinced to make the Order, so we recommend taking legal advice as to how to formulate the reasoning behind the application and having sound evidence in support.
Whilst it is true that the upfront cost of using a High Court Enforcement team to recover possession is higher than issuing a Warrant of Possession, there is no doubt that the speed of eviction can save the loss of many weeks of rental income. Our Guide for landlords to do the maths and work out a cost/benefit analysis shows a timeline where a landlord needs to take action due to the loss they are making.
The overall position for landlords is not a happy one and landlords have every right to feel gloomy but take heart – hope is on the horizon. A vaccine has been found and is being rolled out for the wretched COVID virus, and in the months ahead the public health of the nation will improve. As it does the restrictions currently faced by landlords will reduce.
NOW is the time for landlords to look critically at their options and have a plan for the short to medium term to insulate themselves from further impact. The remedy lies in a more immediate solution such as a Writ of Control, or a Forfeiture based on breach of a non-rental obligation. For some landlords, the decision will be made on economic grounds, as they cannot afford to hold off protecting their position. For others, they can look for a planned exit out of the current quagmire, and explore an agreed or mediated way forward with their tenant.
Whatever the outcome it is fair to say no one wanted COVID, and no one could have foreseen its impact. What we can do is to take steps to use the current law to improve our position or maintain the status quo. Just at the moment that will be a positive outcome.