The Tribunals, Courts & Enforcement Act
An Act to capitalise on collection recovery...or an Act that will prove to be lacking?
Introduction
It was back in 2000 and Professor John Beatson’s recommendations for the regime of Bailiff Law to be set out clearly in one place and to comply fully with the requirement of the European Convention on Human Rights.
In July 2001 the Government published its Green Paper and detailed a chapter ‘A Single Piece of Bailiff Law’. In 2003 the Government’s White Paper reiterated this, starting the section on enforcement agent law with, ‘Government believes that regulation can only work successfully with a single piece of enforcement law...’
In July 2006 the Government announced and published a draft Bill a Tribunals, Courts and Enforcement Bill to help tackle social exclusion and over-indebtedness, and reform of the courts and tribunal system.
During the second reading in the Commons, constitutional affairs minister Vera Baird opened the debate and said that the Bill reflected 3 key principles in the Government’s legislative programme “institutional reform, extending opportunity, and protection for the vulnerable” and it aims to improve the experience of the public in their dealings with legal and quasi-legal problems by improving access to justice and the administration justice.
The Tribunals, Courts and Enforcement Act contains a wide range of provisions, including: reform of the tribunal system; changing the eligibility requirements for judicial office; measures covering the regulation of bailiffs and enforcement by seizure and sale of goods; increased effectiveness for the enforcement of civil court judgements; and measures to protect the over-indebted. The Bill was published in draft on 25 July 2006 and introduced in the House of Lords on 16 November 2006. The Act received Royal Assent on 19 July 2007.
The passage of Bailiff reform...
Back to top
House of Lords
16 November 2006: First reading 29 November 2006: Second reading
Bill as amended:
31 January 2007: Report stage
20 February 2007: Third reading
House of Commons
21 February 2007: First reading
5 March 2007: Second reading
Royal Assent: 19 July 2007
The Governments consultation paper Regulation of Enforcement Agents was published on 30 January 2007. The paper explored three options for regulation of enforcement agents:
1. No change;
2. The creation of a new regulator, the Enforcement Services Commission (ESC); and
3. Regulation by the Security Industry Authority (SIA)
The paper made it clear that the regulation by the SIA was the Government’s preferred option. The Ministry of Justice (MoJ) set out the case for the preferred option, invited comments on these options and set questions to explore the evidence. The consultation period closed on 25 April 2007 and on the 18 March 2007 the MoJ published a report that summarised the responses it had received.
It is accepted that the current bailiff powers are archaic, that change is required and the enforcement industry shouldn’t be too critical of what the Government wants to achieve. A greater sense of regulation is what is needed and the Act is not without some thorny issues...
Distress for rent is a summary remedy which enables landlords to recover rent arrears, without going to court, by taking goods from the demised premises and either holding them until the arrears paid or selling them. Distress for rent is an ancient common law remedy which over time has been extended and modified by statute.
A look at CRAR and the proposals for change....
Back to top
Enforcement by Taking Control of Goods
Abolition of Common Law Right - the common law right to distrain for arrears of rent is abolished
New terminology for seizure:
• Commercial Rent Arrears to CRAR or Commercial Rent Arrears Recovery
• Warrants of Distress to Warrants of Control
• Seizure of Goods to Taking Control of Goods
• Bailiffs to Enforcement Officers
Commercial Rent Arrears Recovery
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CRAR replaces the existing right of distress for rent, but CRAR is only available to commercial landlords/landlord’s managing agents. A landlord wishing to use CRAR will need to authorise a certificated enforcement officer to carry out the procedure on his behalf, in writing.
Commercial Leases
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The draft Bill sets-out that leases may exist in law or by equity. This therefore makes it clear that a ‘lease’ includes a tenancy at will and other forms of leases, including short and long tenancies. A least, however, be evidenced in writing.
Commercial Premises
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A commercial lease will not be a commercial lease if any part of the demise is let as a dwelling. As an example, a lease on a property comprising as a shop and flat above, will not form to be a commercial lease if the flat is used as a private dwelling. However if the lease does not impose any requirements as to its use and the flat is used as a store room, then the lease will be determined as a commercial lease and CRAR can be used.
Rent
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Rent payable by the tenant for possession and the use of the premises under the lease, includes any interest payable, VAT chargeable of the sum and or interest. Any amounts not directly attributed to the tenant’s possession and uses of the premises do not qualify for recovery by CRAR.
Rent Recoverable
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For the right of CRAR the following conditions are:
• The tenant is in arrears of rent before the notice of enforcement given;
• The amount of arrears owed by the tenant is certain and capable of being calculated; and
• The amount owed is equal or exceeds a set amount to be prescribed in regulations
The requirement for the set amount to be equal or to exceed the prescribed minimum is a condition that must be satisfied at two stages; stage one before the landlord gives notice of enforcement and two, before he takes control of goods.
The amount of rent recoverable by a landlord using CRAR is the amount of unpaid rent, less any permitted deductions that the tenant is entitled to make.
One of the proposals by Government is that the set minimum available using CRAR by a landlord would be one week’s rent in arrears.
Intervention by the Court
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The High Court or County Court can intervene in the exercise of CRAR but the court’s powers only arise when the following conditions are met: notice of enforcement has been served on the tenant and secondly, the tenant has made an application to the court to intervene and thirdly, the court is satisfied that the circumstances meet the prescribed grounds for court intervention.
Sub-tenants
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A landlord entitled to use CRAR against the immediate tenant will be able to serve notice on a sub-tenant requiring that the sub-tenant pay rent directly to him. The notice must state the sub-tenant must pay the rent directly to the landlord, until the amount of arrears specified are recovered.
Forcing Entry
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The Act overturns the historic principle that bailiffs would only use force in response to force, to re-enter a property.
The consultation paper was issued during the Parliamentary passage of the Act and respondents used the opportunity to voice concern about the provision of forced entry for enforcement agents.
Seizing Goods
Back to top
Bailiffs will potentially have to self-interpret the new procedures of ‘taking control of goods’ formally known as seizure and the commercial viability, in order to remove goods at the first opportunity.
The Act also introduces new procedures for the sale of goods, creating a timetable for the complete process. The date, time and place of sale (auction) must be notified in-advance to all parties. All goods must be sold at auction under the new Act. The new Act also states, goods not sold at auction are ‘abandoned’ and cannot be held by the bailiff. Accordingly the whole process must therefore begin again, with the re-issue of new paperwork.
An observation that the enforcement industry has already made to the government –who pays the bailiff costs and removal charges, if the goods cannot be sold? The Client?
A further concern to the new timeframes is the potential pressure being placed on the bailiff and auction to sell the goods, regardless to realistic value.
3 Month Rule
Back to top
The government wishes to introduce a 3 month payment rule which may appear a pro-active move, but such a move may also create the opposite desire for new businesses starting-out.
The rule could potentially prevent genuine ‘want to pay’ tenants the window of opportunity to enter into payment-plans and consequently either goods being removed and sold by the enforcement agency or the warrant being returned, unsuccessful.
Up-front Fees
Back to top
The government want transparency and to stamp-out rogue bailiffs charging unlawful fees. The Act proposes to introduce an up-front fee for all bailiff action, intended as a tool to cut-out illegal fee charging.
It is uncertain what the up-front fee will be set at and having secured legislation, the enforcement law reforms contained within the Act require the development of underpinning rules and regulations; a scoping exercise to this end is in progress which involves a series of meetings with relevant stakeholders. The scoping exercise is just the beginning of the process and will identify the issues that require further public consultation.
The Tribunals, Courts and Enforcement Act 2007 Implementation Enforcement Team is further proposing a consultation and implementation of the Act, including a high level indicative timetable and this is anticipated to be completed shortly.
This guidance note has been prepared by Byron Crellin as Managing Director of dbs – Direct Bailiff Services.
For further information about dbs please contact us at:
Suite 17
The Whitehouse
Greenalls Avenue
Wilderspool Business Park
Warrington
Cheshire
WA4 6HL
t: +44 (0) 1925 438 189
f: +44 (0) 1925 438 190
e: byron@dbsltd.net
w: www.dbsltd.net
It was back in 2000 and Professor John Beatson’s recommendations for the regime of Bailiff Law to be set out clearly in one place and to comply fully with the requirement of the European Convention on Human Rights.
In July 2001 the Government published its Green Paper and detailed a chapter ‘A Single Piece of Bailiff Law’. In 2003 the Government’s White Paper reiterated this, starting the section on enforcement agent law with, ‘Government believes that regulation can only work successfully with a single piece of enforcement law...’
In July 2006 the Government announced and published a draft Bill a Tribunals, Courts and Enforcement Bill to help tackle social exclusion and over-indebtedness, and reform of the courts and tribunal system.
During the second reading in the Commons, constitutional affairs minister Vera Baird opened the debate and said that the Bill reflected 3 key principles in the Government’s legislative programme “institutional reform, extending opportunity, and protection for the vulnerable” and it aims to improve the experience of the public in their dealings with legal and quasi-legal problems by improving access to justice and the administration justice.
The Tribunals, Courts and Enforcement Act contains a wide range of provisions, including: reform of the tribunal system; changing the eligibility requirements for judicial office; measures covering the regulation of bailiffs and enforcement by seizure and sale of goods; increased effectiveness for the enforcement of civil court judgements; and measures to protect the over-indebted. The Bill was published in draft on 25 July 2006 and introduced in the House of Lords on 16 November 2006. The Act received Royal Assent on 19 July 2007.
The passage of Bailiff reform...
Back to top
House of Lords
16 November 2006: First reading 29 November 2006: Second reading
Bill as amended:
31 January 2007: Report stage
20 February 2007: Third reading
House of Commons
21 February 2007: First reading
5 March 2007: Second reading
Royal Assent: 19 July 2007
The Governments consultation paper Regulation of Enforcement Agents was published on 30 January 2007. The paper explored three options for regulation of enforcement agents:
1. No change;
2. The creation of a new regulator, the Enforcement Services Commission (ESC); and
3. Regulation by the Security Industry Authority (SIA)
The paper made it clear that the regulation by the SIA was the Government’s preferred option. The Ministry of Justice (MoJ) set out the case for the preferred option, invited comments on these options and set questions to explore the evidence. The consultation period closed on 25 April 2007 and on the 18 March 2007 the MoJ published a report that summarised the responses it had received.
It is accepted that the current bailiff powers are archaic, that change is required and the enforcement industry shouldn’t be too critical of what the Government wants to achieve. A greater sense of regulation is what is needed and the Act is not without some thorny issues...
Distress for rent is a summary remedy which enables landlords to recover rent arrears, without going to court, by taking goods from the demised premises and either holding them until the arrears paid or selling them. Distress for rent is an ancient common law remedy which over time has been extended and modified by statute.
A look at CRAR and the proposals for change....
Back to top
Enforcement by Taking Control of Goods
Abolition of Common Law Right - the common law right to distrain for arrears of rent is abolished
New terminology for seizure:
• Commercial Rent Arrears to CRAR or Commercial Rent Arrears Recovery
• Warrants of Distress to Warrants of Control
• Seizure of Goods to Taking Control of Goods
• Bailiffs to Enforcement Officers
Commercial Rent Arrears Recovery
Back to top
CRAR replaces the existing right of distress for rent, but CRAR is only available to commercial landlords/landlord’s managing agents. A landlord wishing to use CRAR will need to authorise a certificated enforcement officer to carry out the procedure on his behalf, in writing.
Commercial Leases
Back to top
The draft Bill sets-out that leases may exist in law or by equity. This therefore makes it clear that a ‘lease’ includes a tenancy at will and other forms of leases, including short and long tenancies. A least, however, be evidenced in writing.
Commercial Premises
Back to top
A commercial lease will not be a commercial lease if any part of the demise is let as a dwelling. As an example, a lease on a property comprising as a shop and flat above, will not form to be a commercial lease if the flat is used as a private dwelling. However if the lease does not impose any requirements as to its use and the flat is used as a store room, then the lease will be determined as a commercial lease and CRAR can be used.
Rent
Back to top
Rent payable by the tenant for possession and the use of the premises under the lease, includes any interest payable, VAT chargeable of the sum and or interest. Any amounts not directly attributed to the tenant’s possession and uses of the premises do not qualify for recovery by CRAR.
Rent Recoverable
Back to top
For the right of CRAR the following conditions are:
• The tenant is in arrears of rent before the notice of enforcement given;
• The amount of arrears owed by the tenant is certain and capable of being calculated; and
• The amount owed is equal or exceeds a set amount to be prescribed in regulations
The requirement for the set amount to be equal or to exceed the prescribed minimum is a condition that must be satisfied at two stages; stage one before the landlord gives notice of enforcement and two, before he takes control of goods.
The amount of rent recoverable by a landlord using CRAR is the amount of unpaid rent, less any permitted deductions that the tenant is entitled to make.
One of the proposals by Government is that the set minimum available using CRAR by a landlord would be one week’s rent in arrears.
Intervention by the Court
Back to top
The High Court or County Court can intervene in the exercise of CRAR but the court’s powers only arise when the following conditions are met: notice of enforcement has been served on the tenant and secondly, the tenant has made an application to the court to intervene and thirdly, the court is satisfied that the circumstances meet the prescribed grounds for court intervention.
Sub-tenants
Back to top
A landlord entitled to use CRAR against the immediate tenant will be able to serve notice on a sub-tenant requiring that the sub-tenant pay rent directly to him. The notice must state the sub-tenant must pay the rent directly to the landlord, until the amount of arrears specified are recovered.
Forcing Entry
Back to top
The Act overturns the historic principle that bailiffs would only use force in response to force, to re-enter a property.
The consultation paper was issued during the Parliamentary passage of the Act and respondents used the opportunity to voice concern about the provision of forced entry for enforcement agents.
Seizing Goods
Back to top
Bailiffs will potentially have to self-interpret the new procedures of ‘taking control of goods’ formally known as seizure and the commercial viability, in order to remove goods at the first opportunity.
The Act also introduces new procedures for the sale of goods, creating a timetable for the complete process. The date, time and place of sale (auction) must be notified in-advance to all parties. All goods must be sold at auction under the new Act. The new Act also states, goods not sold at auction are ‘abandoned’ and cannot be held by the bailiff. Accordingly the whole process must therefore begin again, with the re-issue of new paperwork.
An observation that the enforcement industry has already made to the government –who pays the bailiff costs and removal charges, if the goods cannot be sold? The Client?
A further concern to the new timeframes is the potential pressure being placed on the bailiff and auction to sell the goods, regardless to realistic value.
3 Month Rule
Back to top
The government wishes to introduce a 3 month payment rule which may appear a pro-active move, but such a move may also create the opposite desire for new businesses starting-out.
The rule could potentially prevent genuine ‘want to pay’ tenants the window of opportunity to enter into payment-plans and consequently either goods being removed and sold by the enforcement agency or the warrant being returned, unsuccessful.
Up-front Fees
Back to top
The government want transparency and to stamp-out rogue bailiffs charging unlawful fees. The Act proposes to introduce an up-front fee for all bailiff action, intended as a tool to cut-out illegal fee charging.
It is uncertain what the up-front fee will be set at and having secured legislation, the enforcement law reforms contained within the Act require the development of underpinning rules and regulations; a scoping exercise to this end is in progress which involves a series of meetings with relevant stakeholders. The scoping exercise is just the beginning of the process and will identify the issues that require further public consultation.
The Tribunals, Courts and Enforcement Act 2007 Implementation Enforcement Team is further proposing a consultation and implementation of the Act, including a high level indicative timetable and this is anticipated to be completed shortly.
This guidance note has been prepared by Byron Crellin as Managing Director of dbs – Direct Bailiff Services.
For further information about dbs please contact us at:
Suite 17
The Whitehouse
Greenalls Avenue
Wilderspool Business Park
Warrington
Cheshire
WA4 6HL
t: +44 (0) 1925 438 189
f: +44 (0) 1925 438 190
e: byron@dbsltd.net
w: www.dbsltd.net