Recovering rent arrears through the courts
October 29, 2020
Category: News
Since March, temporary legislation has been in force to prevent landlords from using specific measures to recover rent arrears from commercial tenants during the height of the COVID-19 pandemic. These measures, in place now until 31 December 2020, mean typically cheap and quick enforcement options like peaceable re-entry to end the lease, statutory demands for payment and winding up petitions are currently a no-go if a non-paying tenant's business has been impacted by coronavirus.
While a new voluntary code of practice for commercial property relationships encourages landlords and tenants to negotiate their way through outstanding rent issues, results are proving less effective, with anecdotal evidence of commercial landlords across England and Wales recovering around 70% of rent in the third quarter of 2020.
Going through the courts, however, is still an available option for landlords – and it's not as costly or as lengthy as you might think.
It's true that some court proceedings can be protracted and costly. Those cases that run all the way to a trial take time and will incur substantial spend on both sides. More often than not though, cases conclude before the trial stage. In fact, it's possible to bring a case to court for a simple hearing shortly after starting legal proceedings. Let's look at what's involved.
How do I get a simple hearing for my claim?
Apply for 'summary judgment and/or strike out' – effectively where the court proceedings are brought to a conclusion before they reach trial. A court may award summary judgment if the defendant has no real prospects of successfully defending the claim and/or provides no reasonable grounds for defending the claim. This type of application can be effective where there is an existing paper lease or tenancy document, imposing an express obligation on the tenant to pay rent.
How long does it take to get to a simple hearing?
Once a claim is issued and papers have been served upon the non-paying tenant, the tenant then has 14 days to file an 'acknowledgement of service' stating whether they intend to defend the claim or, accept part and defend part (or contest jurisdiction – i.e. the country in which the case is being heard). 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. In practice, the application is often prepared at the same time as the claim documents. The landlord may, however, wait to see if the tenant is going to file a defence before making the application.
If the tenant simply ignores the claim, the landlord may instead just request 'judgment in default' after expiry of the 14-day period (or 28 days where the tenant has indicated their intention to defend the claim, but then fails to do so), by using the prescribed court form.
How much does it cost?
There's a court issue fee required, which depends upon the value of your claim. For example, arrears of up to £10,000 will incur an issue fee of between £35 and £455. For claims of £10,000 to £200,000, the issue fee will be 5% of the claim value. Above this, it's a flat fee of £10,000. The fees are reduced if the landlord issues their claim via the online claims portal (not available for claims above £100,000).
The fee for making an application for a summary judgment and/or strike out is currently £255. The court will then list the landlord's application for a simple hearing – most likely held as a telephone hearing – which should be within weeks rather than months depending on how busy the particular court is.
What happens with the judgment?
Similar to the 'Commercial Rent Arrears Recovery' process (now subject to restrictions under the COVID-19 legislation), a county court judgment in England and Wales can be enforced by transferring it up to the high court, where a 'writ of execution' – a court order – is issued. It is possible to seek enforcement at county court level, but recovery prospects are reduced because bailiff enforcement powers are less.
If the claim is above £100,000, the claim will already be in the high court.
There are differences with the fees and processes of enforcement, and it's worth noting that there are several other enforcement mechanisms available to landlords.
How long does enforcement take?
It's a relatively quick process, which typically takes no more than two weeks. A high court enforcement officer will handle the 'transferring up' process to obtain the writ and will issue and serve a seven-day notice of enforcement upon the tenant. Enforcement can be completed within days of the writ being issued by the court.
How much does enforcement cost?
Currently, a £66 court fee applies for the writ, with the landlord also responsible for a compliance fee of £75 in the event of non-recovery. The tenant is responsible for these fees, along with other associated fees and costs.
Read the original article at brodies.com
