This document is the post-consultation report for the Enforcement Review, Consultation Paper 5: Distress for Rent.
It will cover:-
Further copies of this report can be obtained by contacting David Ilic at:
Lord Chancellor's Department
Civil Justice Division
Third Floor, Selborne House
54-60 Victoria Street
London SW1E 6QW
Tel: 020 7210 8654
E-mail: David Ilic
The Review of Civil Enforcement was announced by the Lord Chancellor in March 1998. One of its terms of reference was:
"To consider whether, and if so how, the present power to distrain for rent should be abolished (as recommended by the Law Commission); and to make costed recommendations."
The consultation paper Distress for Rent was published on 8 May 2001. It invited comments on proposals for the future of distress for rent and explored the options of total abolition and a modified procedure.
In addition to exploring the total abolition of the distress for rent procedure, it looked at the question of abolition in the residential sector only and proposals for a modified procedure for use only in the commercial sector. The proposals on the latter looked at a procedure which would remain a self-help remedy but would also make the procedure more accessible and fairer, particularly for tenants. Substantive and procedural rules defining such a remedy would be set out clearly in primary and/or secondary legislation.
Around 400 copies of the paper were sent out to members of the judiciary, governing bodies of the legal profession, enforcement agents, property companies, money advice groups, small business organisations, solicitors, Government departments and other interested parties. The consultation paper was also available on the LCD website.
A total of 157 responses to the consultation paper were received. This was made up of 83 responses from individuals and organisations, including one organisation that had undertaken consultation of 74 firms in the commercial property sector. A breakdown of the number of respondents by sector can be found at Annex A.
The responses were analysed for: evidence of impact of the proposals; levels of support among particular groups; and any possible new approaches to the questions.
It should be noted that not all respondents answered every question, therefore for most questions there will always be a small percentage who had no opinion on that particular area. It should also be noted that we received only two responses directly from tenants.
Q.1 Do you think distress for rent for commercial tenancies should be abolished?
125 respondents (79.6%) were in favour of retaining this procedure in commercial tenancies. Most respondents were staunchly in favour of retaining distress as an effective deterrent even though it was not used very often.
32 respondents commented on its use in residential tenancies with 28 (87.5% of those respondents) in favour of abolition due to perceived potential conflict with the ECHR. One also stated that most landlords would prefer a more reliable performance by the courts anyway. It was submitted that abolition in the residential sector would not be of significant impact.
A small number of respondents were in favour of complete abolition of distress for rent stating that they did not believe that even a modified version of this procedure would satisfy ECHR requirements. Other reasons given were that landlords should not have access to an additional method of enforcement compared to other creditors and the fact that the Law Commission had recommended abolition in 1991.
| It is still the LCD's position that, even with additional safeguards, Distress for Rent would not be an appropriate or proportionate way to collect rent arrears in a residential property, but that it should remain for commercial properties. |
Q.2. Do you use court procedures to collect rent arrears in commercial tenancies?
79 respondents (50.3%) used court procedures, usually when distress for rent was impossible. One of these respondents mentioned that this was only because the landlords concerned were unaware of the remedy. Two respondents, both local authorities, did actively use the court to collect owed amounts. Another local authority distrained and, if full recovery was not made, court proceedings were initiated. Action through the courts is also taken when a tenant has vacated the premises, is not trading, where it is recognised that there are insufficient goods to distrain or has generally frustrated the distress process.
The other 22 respondents (14%) did not use court procedures as they were too cumbersome and distress was the preferred method. One further respondent, who represented a variety of bodies connected with the property market, reported that its members used both court and distress procedures, depending on the particular situation.
Additional feedback was received in relation to the proposal that service charges should be excluded from distress for rent. 15 responses (9.6%) were in favour of the proposal. It was reasoned that rental payments are pre-determined from the lease, which means certainty as to the debt whereas service charges are not ascertainable from the lease. It was also mentioned that service charges are sometimes levied by unscrupulous landlords for 'miscellaneous items'. They were difficult to quantify and it would be reasonable to expect the landlord to prove their entitlement in court.
A representative from a property association revealed that service charges vary significantly and in large multi-let buildings agents sometimes overcharge or make errors in accounting. It is unfair to enable bailiffs to seize goods in relation to incorrectly calculated charges. This explains why respondents are cautious in distraining for service charges. However, in order for it to be a workable system, they wanted 'rent' to be defined - asking whether it included insurance premiums.
22 respondents (14%) were not in favour of exclusion, indicating that exercising distress for service charges is a common practice and that most modern leases specify that service charges are to be regarded as rent. It was indicated that if the proposal were introduced, there would be smaller amounts to collect, which would not prove to be cost effective through litigation. It was anticipated that landlords will simply charge a single rental amount that includes service charges. It was also stated that the paper's assertion that 'landlords do not normally use distress for rent procedures to collect anything but pure rent' was false. In fact, its use is widespread.
Where two parties voluntarily agree to include service charges as rent they are accepting that distraint will be available in respect of such items. As service charges can be recovered in this manner, it adds to the versatility of the remedy. Paragraph 7, page 21 was criticised for stating 'service charges may be genuinely open to dispute' as these charges have to be certified by a surveyor and the lease sets out a process for disputing service charges.
One respondent believed that attempts to differentiate between types of rent would be illogical and treating them differently would be illogical. It would also encourage landlords to exercise their right to forfeit.
Additionally, a separate response from an academic thought it appropriate that further research be carried out since service charges are a standard feature of modern leases. It was also felt that if the government deem it necessary to proceed with this proposal, then consideration must be given to how to inform the market of the consequences.
| Further discussions with property companies have already taken place on this subject. Many companies said that the separation of service charges was simple and straightforward and would expect these to be negotiated and recorded separately in the lease. Other companies stated that if distress for rent was not to be used for the collection of service charges that in the future they would charge tenants rent only (at a higher rate). This proposal is one on which opinion is fairly evenly divided. On balance LCD considers that arrears of service charges (as a variable) should not be open to collection through distress for rent as other remedies will be available. |
Q.3 To what extent do landlords currently levy distress themselves?
102 respondents (65%) had rarely or never come into contact with landlords levying distress themselves but appointed certificated bailiffs. One response provided the figure of only 4.2% of their tenancies being levied upon in one quarter. For example, a local authority had an in-house bailiff who dealt with commercial premises and in particularly complex cases would employ an external agent. One respondent's experience of landlords levying distress personally was restricted to the residential sector but these cases had been illegal anyway. Four did levy distress themselves.
| LCD concludes that permitting a landlord to undertake distress for rent procedures (in a personal capacity) is not appropriate. |
Q.4 (i) How many people normally attend commercial
premises to undertake a distress for rent procedure and at what stage?
(ii) Do you agree
that only certificated bailiffs should be involved in distress for rent procedures?
68 responses (43.3%) were received to part i). The majority of these respondents only sent one bailiff on the initial visit. A few sent two on the initial visit and more for the removal stage. It also depended on the type of premises and goods anticipated to be available. For example, a team of assistants may attend if it is a warehouse. One respondent pointed out that other remedies were available for harassment. (It is an offence under s40 Administration of Justice Act 1970 to harass a person whilst endeavouring to collect any debt due under contract.)
120 responses (76.4%) agreed with part ii)- that a certificated bailiff should levy the actual distress, preventing potential harassment of the tenant by the landlord. The unprofessional behaviour of a minority of the industry, from which most of the complaints derive, would be removed. It would also avoid a potential conflict of interest as the 'creditor' would not be the 'enforcer'. There were, however, concerns expressed in relation to the restrictions on the number of people attending. One respondent stated that it was usual in his experience for the bailiff to be accompanied by a representative of the creditor. However, he thought it could be asserted that the bailiff still retained overall responsibility for the proceedings. Respondents, both bailiffs and solicitors stated that more than two were required when attending large commercial premises for effectiveness. They also indicated that more people are required at the removal stage. Therefore, it would be unsuitable to expect that all personnel attending a removal should hold certificates.
17 further respondents (10.8%) agreed to proposal 3, ie to limit the number of people to two (including the certificated bailiff) unless a good reason existed for others to attend. One respondent emphasised that this would prevent harassment and provided the example of large premises as constituting a good reason to justify extra numbers. There was scepticism as to how 'good reason' could be policed. It lacks precision. It needed a sensible definition such as when violence could be encountered or a large amount of goods were involved. Who would decide the 'good reason'? What is the offence if there was no 'good reason' for more than two bailiffs? Two people disagreed claiming it would be arbitrary and unwieldy. Practitioners are best positioned to determine the optimum number of people to attend. One respondent advocated that only one certificated bailiff should attend.
| LCD recognises that there are some practical difficulties with this proposal. It is our strongly held view that a fully certificated bailiff should be present whenever any procedure under the Distress for Rent Rules takes place. Further consideration will be given to numbers allowed, other safeguards, and whether these issues would be better addressed in an enforcement agent code of practice. |
Q.5 Do you agree that, unless trade is being conducted outside these hours, distress should only be commenced between the hours of 8.00am and 8.00pm?
123 responses (78.3%) were received. 90 were in favour (73% of respondents to this question). It was commented that this proposal was preferable to the current 'hours of daylight' rules. It should only occur during this period so there is access to legal advice. A suggestion was made that the parties should, after negotiation, incorporate in to the lease the hours during which distraint could be levied. It was also said that once the process commences, it should continue uninterrupted so that the tenant cannot abscond with the goods.
33 (27% of respondents to this question) were opposed to the proposal, mainly with the collective reason that it may not be suitable with regards to commercial tenancies and perhaps the normal trading hours of the business should be used as guidelines. The business world is increasingly becoming accustomed to 7 day 24 hour trading. It was indicated that this would be particularly restrictive in view of the paper's proposal to increase the notice period to 14 days. Another body against the proposal viewed 9-5 as appropriate hours and did not see any necessity for distress to be levied outside those hours unless trade is conducted outside of those hours.
In reply to proposal 5, that the right to distrain may not be exercised on a Sunday, Bank Holiday, Christmas Day or Good Friday, 18 respondents (11.5%) welcomed this, especially if residential accommodation was attached to the premises. 10 respondents (6.4%) disagreed, supplying reasons such as it is the current law anyway and any day of the tenant's trade should be included or the effectiveness of the process would be reduced. It was also argued that if a tenant is able to operate his activities on these days, the landlord should be entitled to utilise distress. It was thought that creating the exception in relation to Sundays and Good Friday would be inconsistent with multi-cultural society, i.e. other religious holidays. Another opposed excluding Christmas as in a multi-faith society it is not recognised by all traders, indicating that it failed to appreciate the multi-cultural society we live in. Many businesses run by ethnic minorities do not recognise certain public holidays but instead, may not work on their own festivals. One response thought that distress on Saturdays should be limited. Many commercial offices are closed on Saturdays and obtaining legal advice may be difficult. However, if the notice specifies the actual day on which distress will occur, then this potential problem will be solved.
| It is appreciated why so many respondents believe that constraining distress to hours in which the company is trading is the appropriate answer. However, on discussion with companies it was agreed that short of instructing all companies to display hours of trade, it would be impossible in many cases to know whether the company was trading at specific times. However it is considered that some protection must be afforded to those (and not always the owner/manager - but employees working late or security guards) who may be on the premises alone. LCD accepts that distress should be commenced only between the hours of 8.00am and 8.00pm, unless trade is being conducted outside of those hours. LCD is content that the right to distrain for rent may not be exercised on a Sunday, Bank Holiday, Christmas Day or Good Friday, with the caveat that it will be allowed if the business or company is trading on those days. LCD considers that it would be impractical to legislate specifically to prevent distress on all religious or cultural festivals, but irrespective of a person's faith and culture, it would be wholly insensitive and inappropriate to levy at certain times or occasions, for example, during a funeral. Therefore, whilst LCD is not considering the option of legislating for every event, how enforcement agents handle religious and cultural festivals will be considered further in the Enforcement Review, for example, in the development of a code of practice. |
Q.6 How could the position regarding forcible entry and re-entry be made clearer?
98 responses (62.4%) were received, 27 (27.6% of respondents to question) of which expressly welcomed the clarification of forcible entry but many believed that it should be considered in detail in the wider enforcement review. Three respondents suggested that only 'normal' means of entry (as proposed by Professor Beatson) should be endorsed and these should be defined. One response indicated that the situation is defined through case law and it would be better if it were enacted in statute.
There was a mixture of views as to whether forced entry should be dependent on judicial authorisation. Four responses thought that forcible entry should only be permitted under judicial authority. If a tenant attempts to avoid distress being levied on goods, which are subject to a walking possession agreement, then bailiffs should be able to obtain from a JP/court a warrant authorising forcible entry. Or there should be a summary procedure in order to avoid delays. Divergent opinions were offered as alternatives. One suggested enabling the regulated enforcement agent to conduct forced entry in the same manner as officers levying execution. Another respondent proposed that equitable rules be employed in the interlocutory process, for example, those that apply to Search Orders under Section 7 of the Civil Procedure Act, CPR Part 25, Practice Direction - Interim Injunctions . It was also thought that forcible entry would require judicial authority and the associated jurisprudence would evolve gradually. This should be decided on a case by case basis. If forcible entry is to require judicial authority, issues will arise, namely, the extent to which notice must be given to the tenant and any other occupier and the extent to which summary proceedings may be appropriate. S.6 (1) of the Criminal Law Act 1977 already exists to prevent the unlawful use of violence to secure entry to property if there is someone on the premises who is going to oppose the entry. The prohibition against forcible entry in distress applies even when there is no one present on the premises at the time.
It was also thought that a system similar to Scotland's would be suitable to force entry in order to levy on goods. As this would follow the proposed notice before enforcement action begins, a tenant will have the opportunity to make payment or take legal action. Following the levy on goods, forced entry should be permitted if the premises are not open when notice of the visit is given (at least 48 hours in advance). Clarification was required on the right of re-entry after a walking possession agreement has been entered into, especially what is considered a 'reasonable' period of elapsed time from signing the agreement to gaining re-entry. One particular response suggested the agreement should be renewed every 30 days if the bailiff is to exercise a right of re-entry.
One representative thought that bailiffs should be entitled to employ reasonable force and should be able to break windows and locks, as well as disable alarms. They should also possess full powers of re-entry if reasonably required.
Another said that forcible entry should be defined as entry which causes any damage to the premises entered. Clear guidance was required as to what the bailiffs can and cannot do.
It was suggested that where a bailiff finds a property secure or is refused access, the debtor should be given four days written notice of the intention to force entry onto his premises to levy distress and, following levy, there should be two days written notice of an intention to force re-entry to remove the seized goods.
Five respondents thought the position was sufficiently clear. The other respondent submitted that they would not welcome any procedure that would increase the recovery period and costs. Two stated it should not involve the judiciary because that would undermine the whole ethos of distraint.
On certain occasions, the tenant has not allowed the landlord to exercise distress due to premises being locked. In these situations, the landlord can only forfeit the tenancy by peaceable possession for non-payment of rent. In cases of forfeiture, goods in the property cannot be distrained upon. It was said that after forfeiture, the landlord should be able to levy distress on any goods left within the property.
If the situation is clarified, the need to seek judicial authority is reduced. A respondent thought that a tenant's rights should be secured through some form of indemnity required by legislation.
Some respondents thought that tenants should be given proper advice when entering into their lease contracts.
Many respondents believed that access through open doors/windows should be allowed, some with caveats such as no physical damage to property, using a locksmith or no physical force (against landlord) involved.
| Respondents are obviously keen to see some clarification in the laws relating to entry. LCD agrees entirely with those who have suggested that this must be looked at in conjunction with the responses to the bailiff law questions in the Green Paper Towards Effective Enforcement. LCD's preliminary view is that there have been no strong arguments to allow entry other than by normal means for the purposes of distress for rent. |
In reply to the proposals to abolish right of entry onto third party premises, 30 respondents (20%) expressed their views. 16 agreed, with one suggesting an exception where the third party has no right to occupation. Another exception supplied in two responses was where the bailiff was pursuing goods already subject to a levy he has made. In such circumstances, the bailiff should apply to a JP for a warrant entitling the bailiff to go onto third party premises. One stated that it violates Article 6 of the ECHR , in addition to being rarely invoked and of little practical value.
Those opposed to the abolition of the right of entry to third party premises argued that it functioned to serve its purpose. If it were to be abolished, the tenant would frustrate the process by claiming that goods the landlord intended to distrain were third party goods. It was important that it was retained (even though one respondent commented that he had only used it once in 20 years) in the event that a tenant does behave without impropriety. Effectively, it is a deterrent. It was also pointed out that removing it could cause problems in relation to access across third party premises, especially shopping malls and industrial estates. Therefore, removing this right would allow people to frustrate the process, inappropriately. It was commented by one respondent that there should be further thought given to this area as commercial landlords will want to ensure their interests are protected where a tenant attempts to transfer goods to third party premises. Another thought that in some circumstances, it might be appropriate to allow a bailiff to follow goods when he is certain of their ownership and they are clearly identifiable. If the bailiff is barred by the third party, then an application should be made to the court to allow entry.
Where, following a levy, goods have been moved to a third party's premises, two days written notice of an intention to force entry to that property to remove them should be given. There should be no right of entry to the third party's premises prior to the levy. This will help to prevent dishonest tenants from transferring their property to other premises whilst giving them enough time to resolve matters.
| In other cases a bailiff is often enforcing a court warrant with judicial oversight; in distress for rent there is no such oversight. LCD is not convinced that allowing forced entry onto third party premises and certainly not prior to levying, should be allowed. It should also be stated that some respondents referred to a general right of entry to third party premises to pursue goods. This is not the case. This question referred to the right of entry for alleged fraudulent removals by which the landlord had to show (in almost impossible detail) deliberate fraud. It is LCD's view that this is so little used that it can be safely repealed without detriment to the remedy. |
Q.7 Do you agree that notice should be given at least 72 hours before the right to seize goods arises? What information should it include?
131 responses (83.4%) were received. 83 (63.4% of respondents to this question) opposed this proposal because the tenant could remove valuable property. It was difficult to trace goods not easily identifiable, for example, tobacco and confectionery. The element of surprise was the advantage of the current system to the landlord. Four of these respondents recommended that the remedy should be stipulated in the lease itself, which should contain a clause specifying when the right becomes exercisable. This term would leave no doubt from the inception of the tenancy, thus resulting in the automatic existence of the remedy. It was also considered that a tenant is obliged to pay the rent regardless and only has the right to object if the lease incorporated the right to set off. But most leases exclude this right so in most cases there would not be a substantial claim.
It was also said that the notice might be inaccurate and leave the tenant with insufficient time to take action. There was a query as to whether the 72 hours notice included weekend and Bank Holidays. One respondent submitted that the written period of notice should be harmonised with that for local taxation which is no less than 14 days before a visit can be made. Another recommendation was that when the warrant is originally served, the bailiff should advise the tenant of the possibility of distraint by removal of goods if the tenant is unable to pay. It was also thought that the period should be three days and the notice must state that payment is needed in three days or enforcement action will follow without further notice.
The remaining 48 (37% of respondents to this question) agreed with the proposal. Two fully supported it and argued it would enhance rather than impair the process. It would be useful as the tenant could gain legal advice and the time period should be in working days, excluding Sundays, Bank Holidays and so forth. However, the majority qualified their consent by stating there should be shorter notice (i.e. 24 hours) due to the risk of the tenant removing property from the premises. Or the requirement for 72 hour notice be waived if the landlord can demonstrate (to a court) that distress could be frustrated by delay. It was emphasised that the obligation to give notice should remain that of the landlord and not the bailiff. One thought that 72 hours was too short and considered it useful if affected third parties were notified too. Another thought it too short for the tenant to apply for relief to the court and thought a more realistic time-scale was 7 or even 14 days. Other ideas included giving the landlord the right to commence distress after the notice has been served before the 72 hour period has elapsed if he has good reason to believe that tenant may wish to frustrate distress. There should be three working days between delivery of the notice and the levy of distress but not a requirement to minimise the risk that the tenant will abscond.
One respondent gave their consent, provided that the landlord has to confirm that such a notice has been sent by post rather than serving it personally. The landlord should not have to warn the tenant of the likely date and time of the bailiff's visit. Another respondent thought that if adopted, and Saturdays and Sundays are included within the notice period, then the opportunity which the tenant has of seeking legal advice and arranging finance (such as contacting banks) will be reduced. An alternative would be to forbid the landlord from removing the goods for a longer period to allow the tenant to challenge or make arrangements to pay. Then the landlord should be required to give the tenant notice of his rights at the time of levy. A failure to do so would invalidate the distress.
It was suggested that the information to be provided to the tenant was to be clear and specify the amount owed, dates payment was due, explanation of the distress process, how to pay, where to seek advice, and inform the tenant of his rights. They should also show their certificate before exercising the remedy. The notice should contain explicit information about what will happen when it expires, what to do to prevent it and clear advice on how to gain help, for example, from a solicitor. There should be a clear statement of the tenant's right to challenge the existence/amount of debt by application to the court. It was also recommended that notice should specify that if payment is made by a specific date, then the goods will be released. The bailiff should have a duty to minimise the disruption to the tenant when making the first visit.
Another idea that was well supported was the inclusion of a 'health warning' in the rent invoice which would clearly specify consequences of failure to pay.
A response specifically commented on point 23, chapter 3 of the paper and stated that a concession of paying rent in instalments was presently offered to a small number of tenants who are able to verify their financial difficulties. However, it is administratively arduous and if more widely available would be used by all tenants. They also commented on point 22. The landlord should not be obliged to include warnings within his invoice. Several expressed the opinion that a tenant should be aware of his rights and obligations when entering into a lease, others were concerned that some tenants, particularly saying that small businesses were as vulnerable in their lack of knowledge of the law as any lay person.
| There was obviously a great strength of feeling about this proposal. However LCD believes it is appropriate that all debtors be given clear warning and simple information about the possibility of goods being removed. This proposal has also been discussed extensively with landlords' representatives. Many landlords already give warning that the seizure of goods is a possible outcome of failing to pay rent. Therefore, LCD concludes that the requirement for all tenants to receive such warning would not impose an excessive burden on landlords. LCD believes that the 72 hours notice should not include weekends, Bank Holidays, Good Friday or Christmas Day as its purpose is to provide tenants an opportunity to seek advice or help (possibly from the civil courts). |
Q.8 Do you agree that a tenant should have the right to challenge the legitimacy of a landlord's demand for payment of arrears of rent where there is a genuine dispute?
There were 129 responses (82.2%) to this question. 103 (79.8% of respondents to this question) welcomed protection of the tenant's right, with two believing it to be the current situation. It would be ECHR compliant. However, there were different views as to how this should be endorsed. The majority did agree to the court's involvement but only if the applications were dealt with efficiently and with speed, for example, within 5-10 days. This was to prevent tenants from delaying the inevitable through deferring enforcement by the landlord; an aspect which is recognised in the paper. To avoid court procedures being utilised as delaying tactics, the government should insist that the tenant is liable to pay costs if the action is unsuccessful. Three respondents commented that due to the fact that most rents are fixed, if the tenant has been paying in the appropriate manner, there should be minimal grounds for dispute to occur.
One respondent thought that challenge should occur provided it is allowed under the terms of the lease which often prohibits right of set-off and counterclaim against rent. Another thought they should only challenge after seizure of the goods.
It was suggested that the bailiff should explain to the tenant at his initial visit that they have the right to challenge the action. It was also suggested that there be provisions within the lease for dispute resolution. However, for genuine disputes, the tenant should challenge the demand within 7 days.
One respondent thought a genuine dispute might be difficult to identify. The remedy does not have to be judicial but must be independent of the bailiff and landlord. So it would be insufficient for the tenant to simply forestall legal action by serving a notice on the landlord or bailiff. A bailiff must be in the position to act on the warrant unless ordered not to do so by the competent authority. Therefore, if enforcement cannot proceed, the bailiff must be served with a formal document issued by an independent arbiter, recognised by the government. The courts should be involved in any application to delay or prevent enforcement of a warrant. The tenant should give to the landlord 72 hours notice of his intention to challenge and should be done before the bailiff is involved or it might be used as a device to thwart the bailiff's actions.
It was indicated that if the proposal to exclude service charges were enforced, the scope for a genuine dispute would be drastically reduced.
Four respondents thought a specialist tribunal could be used instead, for example the Leasehold Valuation Tribunal or Rent Assessment Committee. It was also thought by a few that seizure of goods should only be prevented by an injunction from the tenant and to avoid any delaying strategy, any costs incurred by the failure to obtain an injunction would be met by the tenant. It was thought that as the overall number of challenges would not be substantial any burden on the court would be minimal.
Two thought the challenge should be made on receipt of 72 hour notice and not after the bailiff has attended.
Another suggested two possible models which could be considered. Firstly, there could be a mechanism by which the onus would be on the tenant to bring proceedings for an injunction to restrain distress or if it has occurred, for damages. Secondly, there is the procedure by which the landlord's right to distrain will be suspended in the event that a tenant serves a counter-notice with the onus being on the landlord to seek the court's permission to continue with the distress. If the tenant serves the counter-notice but the landlord proceeds without permission, the tenant has the remedy of injunction/damages. The latter has the disadvantage that it would permit the tenant to delay proceedings and the former puts the burden of commencing litigation on less affluent tenants.
Two respondents thought there was substantial protection available currently, i.e. application to the court for an injunction preventing the removal of goods from the premises and claim for damages where there has been unlawful distress levied. This protection would be enhanced by the 14 days proposal that would give the tenant time to apply for an injunction. It was believed that the court should order a payment into court as a condition of granting such an injunction, pending the resolution of the dispute.
One disagreed with the proposal that the tenant could apply to the court to challenge the claim. It was indicated that even under the small claims procedure, where the claim involves an injunction the claimant will need legal advice. Involving the courts, it is argued, will deter harmonious relations between the parties. The most effective method of dispute resolution is mediation.
Only one respondent specifically referred to what they believed was the objective behind these proposed rights, namely Article 6 of the ECHR. From the three respondents opposed to the proposal, two reasoned that it already represented the law and thus, would simply replicate the existing situation. If it is later ascertained that the distress was unlawful, then the tenant may challenge the landlord. The third respondent who disagreed stated it was clear whether payment was due or not and if wrongful distress is levied, the tenant would pursue remedial action.
In response to the proposal that bailiffs, in addition to showing their certificate, must also give clear information on the whole process, there were 23 responses. One respondent disagreed, claiming it was an unnecessary complication. The remaining 22 were in favour, with one respondent giving the reason that it was necessary to prevent conflict with the ECHR. It is also positive as it can only help the parties resolve their dispute. The information should be in plain language and free from jargon. Translations should be made for those whose first language is not English. Paragraph 28 was specifically agreed to.
| It is LCD's position that it is appropriate for all tenants to have the opportunity to contest a claim for rent arrears and should be given information on how to do so. LCD doubts whether applications could be dealt with within 5-10 days (as suggested by respondents) but this would depend on the type of dispute raised and the remedy. If the court could deal with it on paper this would obviously speed up proceedings. LCD, DTLR and Court Service will continue to explore the best method of appeals and whether existing specialist tribunals could be used. |
Q.9 Do you agree that 14 days prior notice to the tenant before any sale is permitted is appropriate?
126 responses (80.2%) received. 97 (77% of respondents to the question) were in favour. 29 (23%) opposed it. The respondents in favour were concerned about perishable goods. Bailiffs thought that the 14 day period should commence from the date of levy and not date of removal. Serving notice after removal would cause delay in their sale and storage costs of more than a week which the debtor would have to pay.
The responses against the proposed action considered it to be an unnecessary complication which would cause further delay, and took no account of livestock or perishable goods. A respondent remarked this would be lengthened with the introduction of 72 hour notice. Three respondents advocated a 7 day period (as in the county courts) whilst three thought the current 5 day period was sufficient. Perhaps there could be special provisions for the perishable type of goods, i.e., a shorter period. 14 days would also incur heavy storage costs. However, one response wanted the tenant's rights to be fully strengthened to ensure that goods are not sold which may not be replaced. Thus, they recommend a 28 day period of notice before sale.
| It has been made clear by most respondents that the sale of goods only takes place in a very small percentage of cases so the effect of this proposal should be minimal. As stated in the consultation paper, "In relation to the right of access to court contained in Article 6 of the ECHR, we believe the tenant's rights should be strengthened …" This remains LCD's position. Exceptions should of course be made for perishable items, livestock and similar. |
The proposal aiming to only allow distress to be levied when outstanding rent exceeds one quarter of the annual sum received a substantial response. 34 (22.8%) disagreed with the proposal claiming it was illogical and that it would fundamentally alter the nature of the present remedy. If the rent is due, there would be fragile grounds to argue to the contrary and would be open to abuse by tenants. It would give them an additional quarter free of charge and if they were then to go into liquidation, the landlord would have no remedy. The fact that some tenancies require rent to be paid weekly or monthly means that the proposal should be changed to one term, whether weekly or monthly. Even when it is payable on a quarterly basis, this effectively gives the tenant two quarters rent and therefore, excessive 'credit'. If the tenant is unable to pay, it would be more constructive to address this issue immediately, rather than when two quarters is due.
Four of the respondents stated that landlords would demand higher rent deposits which would have an adverse effect on the property market by making it difficult for tenants to afford accommodation. It was also observed that the larger and older the debt, the harder it is to enforce because it is beyond the debtor's means to pay.
It was also anticipated that landlords would try to collect rent earlier through the courts which will lead to more burdens on the court system or seek repossession frequently.
Landlords are not in the same position as trade creditors to withhold services when payment has not been received. It was mentioned that the wording of the proposal implies that there must be more than one quarter's rent due (it is proposed that distress is only levied when the outstanding rent exceeds one quarter of the annual sum) instead of only one quarter.
It must be remembered that some rent sums, even for a quarter, can be in the realm of hundreds of thousands of pounds.
Seven respondents, one who did not deal with commercial tenancies, agreed with the proposal.
| In addition to the consultation paper responses, LCD has spoken to various types of property companies who use distress for rent. We accept that there are many companies who lease properties on weekly tenancy agreements, however we maintain the position that amount owed should not be disproportionate to the costs of recovery. LCD is considering amending this proposal so that the outstanding rent exceeds 4 weeks or 1 calendar month. It should be noted that the purpose of this proposal is not to stop landlords from undertaking procedures to distress for rent swiftly but to make it clear at which point distress is levied. Therefore the tenants that will receive most protection from this proposal are those who pay their rent weekly. |
Q.10 Please comment on the appropriateness of the following list of exempt goods: such tools, books, vehicles and other items of equipment as are necessary for use personally by the tenant in their employment, business or vocation and such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying the basic domestic needs of the tenant and his family.
127 responses (80.9%) were received in relation to this question. 80 respondents agreed with the suggested list. Most were in agreement that the list should be restricted to those goods which are necessary for basic living requirements. However, two respondents who agreed with the Insolvency Act 1986 list, thought there should be no exemption in relation to business goods or it would detract from the effectiveness of the entire process and goods in the name of a spouse or limited company where the tenant is director should not be exempt. Another respondent stated there was no need to make reference to household exemptions if distress in relation to residential tenancies is abolished. Specific reference to goods that are on finance with third parties, subject to hire purchase agreements, was requested by a few. Hence, the bailiff should be obliged to inquire into third party claims before selling the goods. One respondent wanted all goods for which qualified privilege currently exists to be considered i.e. agricultural tenancies, farm animals.
Out of the 47 respondents who disagreed, 11 of these considered it to be inappropriate for business premises as it excluded what bailiffs normally find on debtor's premises. Although the list of domestic goods was generally favoured, the tenant could argue that virtually anything found was necessary to business. Therefore, the effectiveness of distress would be undermined. The list was vague and subjective and the court should decide for individual cases. Four respondents also thought that vehicles should not be excluded because usually they are the most expensive assets on site. One also commented that computers should be excluded if the tenant is able to prove that it is essential for his business. The exemptions used for non-domestic ratings were also suggested because tools of trade are not exempted for the collection of business rates.
It may prove to be problematic with regard to third party goods. Tenants could claim that goods were the property of other individuals/companies. One respondent thought if the third party is connected with the tenant, for example, a subsidiary or associate company, then the goods should be seized. Three thought that in relation to ownership of goods, the burden of proof must rest with the tenant or third party. Again, someone thought that goods in the name of a partner, spouse or limited company where the tenant is a director should not be afforded exemption. There should be a clear list of third party exempted goods. It was thought there was a strong argument for retention of existing regulations which allow third party goods to be seized where there is a beneficial interest to the tenant. If restrictions were imposed, it would be easy for tenants to circumvent distress by listing goods against other people's names. Another thought that some kind of 'provisional' impounding might be a solution in order to prevent a tenant removing the goods until adequate evidence of third party ownership is produced.
It was submitted that there has been confusion and case law over what constitutes 'personally'. Therefore, it should be defined as 'personally by the tenant in their employment'.
A separate organisation was specifically concerned about the rights of third parties in this context so it responded to the Independent Review of Bailiff Law. The greatest difficulty is presented when the true owner discovers that their goods have had distress levied upon them and consequently been sold. This should apply to Recommendation 19(c). Therefore, it recommends that a third party should be able to halt distress by serving a notice on the landlord, asserting his ownership at any time until the goods are sold. In response to Recommendation 19(b), it feels that the law should state that goods on hire purchase shall not be liable to seizure until title has passed to the hirer or buyer. Finally, in relation to Recommendation 33, it accepts that a bona fide purchaser should have good title. Where the goods are wrongfully seized though, the landlord should be liable to the true owner. A bailiff should be immune when he can display that he was unaware of the true ownership and had made reasonable enquiries as to whether they belonged to the tenant.
It was said that under Article 1 of the First Protocol to the European Convention on Human Rights, it is difficult to see how goods of a third party could be exempted under the provision. Once again, the landlord and bailiff should have a duty to notify a third party reasonably believed to own or claim an interest in the goods. The true owner should have the express right to apply to the court for an appropriate order.
| LCD has not yet made a final decision on the appropriate goods to be exempted. Further consideration will be undertaken with the responses to the Green Paper as it will be appropriate to have consistency in bailiff law wherever possible. Respondents who pointed out that there is no need for any reference to domestic items are of course correct, but LCD would prefer to use a list which could be used and/or adapted for use by all bailiffs. For this reason, LCD will give further consideration to the suggestion that List B or similar should be introduced as a basic protection (possibly within legislation) and more detailed guidance given through Statutory Instruments or codes of practice. |
Q.11 Should it be mandatory for assessment of the goods to be made on the premises so that they are not disproportionate in value to the outstanding debt?
126 responses were received (80.2%). 78 (61.9% of respondents to this question) agreed with the introduction of a compulsory assessment. A flawed appraisal would constitute a ground upon which the tenant could apply to the court to avoid distraint. The bailiff should be correctly trained to assess. Reasonable safeguards should exist which would protect the bailiff from a claim of under-valuation. Or the initial valuation could be treated as a guide only with no liability for error. Any over-estimation could be returned to the tenant once the debt has been satisfied. This is why only a certified bailiff with experience should levy distress.
48 (38% of respondents to the question) others said it would increase costs, would be difficult to operate practically and generally be an unreasonable burden on the bailiff. In most cases, the value fetched at auction is lower than the retail value. It would leave the bailiff susceptible to claims under the Torts (Interference with Goods) Act if incorrectly valued. A respondent recommended that the tenant apply for appraisal at public auction if he believes that too much has been taken to meet rent arrears. Certificated bailiffs are not usually trained to make formal valuations. Distraint works because it is simple and lacking in bureaucracy. This would make it less effective. Disputes should be resolved after distress has been levied.
Two landlord representatives commented that they did not primarily wish to remove goods but wanted payment of arrears. Therefore, if the goods are of more personal value to the tenant than could be raised in a public sale, this is an inducement to the tenant to pay. If the proposal is enacted, there will be no an incentive for the tenant to pay.
It was also suggested that a formal appraisal should be made only at the request of the tenant and before it is made, the tenant should be notified of the basis of the appraiser's fee which is to be added to the enforcement costs. Another recommendation was that the tenant could apply to the court for the release of any goods if he can prove the landlord is sufficiently secured.
| Although many respondents appeared to be in favour of this proposal, further discussion with bailiffs and bailiff organisations raises some particular problems. For example, is it an unnecessary extra cost to the tenant? Does it leave bailiffs too vulnerable to error? Further discussions with interested parties have also suggested that this is an issue which could be addressed in the long term, as the Enforcement Review proposes the way forward on regulation and related issues such as how complaints are handled and Codes of Practice. LCD agrees that this is an issue which should be explored further in the Green Paper. LCD believes that any concerns over the training and regulation of bailiffs to undertake valuation and the introduction of a new charge (for the debtor) for a compulsory undertaking would need to be addressed before such a system could be introduced successfully |
Q.12 Do you think that goods should not be sold unless the sum realised is likely to be commensurate with the outstanding debt?
113 responses (72%) were received. 36 respondents (31.9% of respondents to the question) agreed. It was suggested that goods should not be seized, unless they are adequate to cover the costs of removal plus at least 10% or £50 of the debt (whichever is the lesser). This is the Scottish Law Commission proposal and approved by Professor Beatson. This would also comply with the ECHR proportionality requirement.
77 disagreed (68.1% of respondents to the question), the principal reason being the difficulty in estimating sale values. The sum might not be commensurate with the debt but it may be all the landlord is likely to receive. It may be appropriate for domestic purposes but not the commercial context. Preventing the landlord from levying for distress benefits other creditors instead. A separate respondent did not comment on this proposal as he thought this area came within the ambit of the wider review. A further response stated it would depend on the sums involved. So it may be reasonable when large amounts were in arrears but not when they were smaller. A post seizure mechanism could be provided for aggrieved tenants and a bailiff's code of practice.
Some respondents replied specifically to the summary of proposals contained in the paper. Thus, there were 17 replies to 'the onus will be on the bailiff to get the best price reasonably obtainable when selling the tenant's goods'. 12 agreed and four disagreed, (one further comment) stating there were sufficient safeguards in place. This responsibility cannot be placed on the bailiff. At sale, it is the auctioneer's role to obtain the best price for goods. Even he is subject to consideration of the economic climate and numbers at the auction. One response thought there should be a requirement on the landlord to appoint professional assessors to determine the value of goods. When specialist items such as works of art are involved, reasonable measures should ensure a specialist auction or private treaty sale. Two believed the bailiff is already under a common law duty to obtain the best price as this is why goods are sold at public auction.
| This raised many of the same issues as the responses to the preceding question. Again it is being further considered in responses to the Green Paper. |
Q.13 Do you agree that a tenant's goods may not be sold to the bailiff or landlord or to any party connected to the landlord or bailiff without the consent of the debtor?
108 respondents (68.8%) agreed with the submission. It was observed that it is unlikely that those connected would have any wish to be further involved. Some clarity is required as to the definition of 'consent', according to one respondent.
28 respondents (17.8%) disagreed and their responses consisted of the views that as long as goods are sold through a properly conducted auction at 'arms length' there does not need to be a ban on a purchase by an associated party, although direct sale should not be permitted. Provided the sale is publicly advertised, the landlord or bailiff would be bidding as members of the public. The responses considered extension of the safeguard to any 'connected' party ambiguous; resulting in the prevention of genuine offers which would not be in the debtor's or landlord's interest.
| LCD is of the opinion that the thinking behind this proposal as outlined in the Consultation Paper is sound. We accept that the wording "connected party" may be ambiguous. Full acceptance of this proposal may depend on ensuring that any proposed wording is unequivocal in its meaning. |
Q.14 Do you agree that the tenant should have these rights? (see paragraph 78 below)
There were 122 (77.7%) replies and 40 responses (32.8% of respondents) approved the complete list. The remainder of respondents varied in which "rights" they agreed and disagreed with.
Once again, many respondents believed these rights would contribute to ECHR compliance. However, they did offer individual opinions on the subject. These included proposals that landlords and bailiffs must be protected against claims which aim to avoid payment, the court should be involved in order to safeguard these rights and the view that if the claim is unsuccessful, the bailiff's costs must be recoverable from the tenant. The right to challenge the existence and amount of debt should occur prior to the bailiff's involvement in order to avoid delays and costs. Two understood that they already existed under the present law. It was suggested that the Enforcement Services Commissioner investigate complaints and should arbitrate.
From the dissenting responses, seven did not agree to the entire list. Most of them disagreed with the interim order. A respondent to the question considered that reform of the rights should exist as part of the wider review as complaints of illegal levies are not limited to distress for rent.
For interest and to give an idea of the breadth of numbers agreeing or disagreeing with the list of suggestions, the following is a breakdown of the response from Masons (law firm whose property litigation specialists undertook a survey of clients). It was only on this particular question that this firm broke down the list into discrete elements and sought views on each.
| Agreed | Disagreed | |
| To challenge the existence and amount of the debt | 87% | 23% |
| To challenge the bailiff's charges if unreasonable | 81% | 19% |
| To challenge the way in which distress was levied | 47% | 53% |
| To apply for an interim order, prior to sale, restraining the sale or for return of the goods | 65% | 35% |
| To seek damages for any loss suffered | 59% | 41% |
| To receive a proper account of the goods seized and sold | 83% | 17% |
|
LCD agrees that reform of these rights should be considered as part of the wider review as complaints about illegal levies are not limited to distress for rent. These rights will be considered in our work on bailiff law. However there are problems with distress for rent particularly in its current format where action can move very swiftly and tenants do not always understand the law or know where to seek advice. Bailiff law is a specialised and complex area and distress for rent is possibly the least used remedy. LCD will continue to explore the best way of emphasising and implementing the rights of tenants and landlords in both this procedure and bailiff law. |
Q.15 Are there any other circumstances under which a tenant should be entitled to bring proceedings?
There were 27 responses (18.1%) to this question. 22 of the respondents stated that they did not think any other circumstances should be included, although two did think they could occur but cannot always be contemplated in advance. Other responses varied, including, tenants should be: informed of their obligations when undertaking a commercial lease, only challenge if the debt has been paid and should also be able to challenge the price at which the goods were sold, method of sale and the purchaser. Two said it should be considered in the overall review of enforcement.
| Please see LCD's position on Question 14 above. |
Q.16 What do you think should be the main principles behind setting fees and charges for the distress for rent procedure?
There were 40 respondents (25.5%). 17 (42.5% of the respondents to this question) specifically welcomed the proposal in the paper concerning greater clarity. The statutory fee scales were criticised as being poorly drafted which has resulted in numerous interpretations and confusion for the debtor. Bailiffs were alarmed at the fees they are supposedly charging, exemplified by paragraph 56 of the paper, which suggests a tendency to exploit and charge unlawfully. They submitted that this was false.
Opinions were offered regarding the principles to be established. A common principle advocated by many responses was that it must be accepted that costing involves a profit element for the bailiff, hence the need for adequate payment of bailiffs. Enforcement is expensive and the private sector of the industry cannot operate at a loss. Another main principle advocated by a few was that remuneration should be fair and reasonable. The system should be permeated with openness. There must be proportionality in order to comply with the ECHR. All modern enforcement options should be covered, for example, taking cheques and instalments; to replace 'reasonable costs' with fixed fees plus reimbursements (e.g. a fixed fee for removal based on personnel and time, with cost of transport hire); to finance a professional structure for bailiff profession; to routinely increase annually in line with inflation (as in Scotland).
A respondent also believed that proportionate charges to debtors and the liability of the instructing creditor were highly relevant. Another respondent considered that the three main principles should be a fee for each necessary action taken, which allows an element of profit and finally is adjusted annually by RPI or inflation. Thus, the fee levels should reflect the best interests of all parties.
It was suggested that there should be a sliding scale with an initial set fee. Other responses thought there should be a standard charge as a percentage fee of the value of goods seized is likely to result in an incentive to concentrate on obtaining charges from tenants with substantially more debts. A bailiff representative believed there should be a set fee plus time on the premises. Another suggested fees set by the free market. One thought there should be a flat fee (rather than percentage) based on amount of the debt and could increase in stages, depending on amount of debt. An hourly rate fee was considered to be possible as a particular distraint could take longer than another. There could be a single set of fees governing all types of enforcement action. There should be rules not just about what a bailiff can charge but when he or she can charge it. For example, when the bailiff who comes to deliver a letter brings the van as well.
Q.17 Should those principles take into account the different relationships that bailiffs have with firstly the tenant, and secondly the landlord?
21 (14.1%) replies were received. The relationships between the bailiff, tenant and landlord should be considered with the exception of two responses which did not provide reasons for their opposition. These included opinions that the bailiff's costs should be borne by the tenant and where the levy is unsuccessful, the landlord is to pay the cost. One response however, thought this should be subject to reasonableness of the expenses incurred. This would prevent landlords issuing warrants indiscriminately, where there is no chance of successful enforcement. It was thought that the costs paid by tenants should be limited to those provided for in a prescribed list. Another respondent stated that the tenant should pay the standard amount and the landlord pay the appropriate balance. A couple were of the opinion that the landlord and bailiff should contract to establish if any further fee is to be paid. One response considered that the tenant should meet all costs.
Another stated the fees should not be added to the rent but payable by the landlord and recoverable by him, not as rent from the tenant. It would ensure fees are reasonable and distress was only levied when the amount was meaningful. It was also observed that a tenant may be required to indemnify the landlord against any costs incurred in recovering rent arrears. This has led to the bailiff charging the statutory fees to the tenant but also charging a separate fee to the landlord which the tenant is required to cover. These practices should be banned.
Q.18 Should these principles be used to set out all fee scales or a single fee scale?
5 responses agreed to the all fee scales proposal. One of these thought the single system of charging depends on whom is doing the work, in accordance with Professor Beatson views. The same principles may apply across the spectrum but the respondent was doubtful as to whether a single system of classification was possible. Seven responses approved the single fee scale. For example, one fee scale with variables, encompassing all forms of debt enforcement. A further response regarded scale fees as restrictive and thought the market should determine this, not legislation. A further response thought it difficult to achieve uniform scale of fees. A further response said distress for rent is different to other forms such as Council Tax and magistrates fines due to the average size of debt. It requires a separate fee scale.
Q.19 Should any fee scale or scales be regulated?
There were 93 responses (62.4%), the majority of which welcomed regulation. It was commented that in order to prevent excessive charges being charged to the tenant, a statutory scale of costs should be introduced. Another stated that fees should be regulated subject to industry conventions. It was also thought that bailiff visits without levy should be limited. Two responses disagreed with the introduction of more detailed regulations.
Q.20 How could the existing fee structure be improved?
25 respondents (16.8%) answered this question with comments on the revision of the existing fee structure including how the percentage charges of the current sliding scale should be changed-for example, 10% on the first £2000, 5% on the next £3000, 2 ½% on the next £5000 and 1% on any additional amount. Also, it was stated that the statutory fee levels should be updated to comply with the requirements of the modern economy. They should be standardised to avoid abuse, such as a lower and set fee for a statutorily limited number of unsuccessful visits. It was suggested that there should be a set fee plus time on the premises. There should be regard to proportionality requirements.
Another respondent thought that within the existing framework, the bailiff should provide a detailed account of fees to the debtor in all cases and there should be a fast and informal taxing procedure to deal with misuse of the system, such as repeated unnecessary visits. He proposed that individual magistrates could perform this task, instead of benches of three. Thus, this would imply that only district judges would be involved in the process and not lay magistrates.
If it were revised, the fees would be realistic and the number of cases referred to bailiffs would be reduced. Presently, a debt of £25,500 will only attract a levy fee of £184.75 which is only 0.72% of the debt.
Tenants should be notified of the fees at the time distress is levied. Fundamentally, the principles identified in the answer to Question 16 should be applied.
|
Phase Two of the Enforcement Review set out a number of models for a new enforcement structure in the Green Paper, Towards Effective Enforcement. Paragraph 5.9 of the Paper applies to distress for rent fees as well as other fees or charges for enforcement. "For its strategic vision to be achieved and effective, fair and appropriate enforcement delivered, it is the Government's view that the general principles governing enforcement agents' fees should be set out in primary legislation; alongside the powers necessary to enable the regulator, after consultation, to propose clear fee scale (s), to be set out in secondary legislation by the Lord Chancellor." Although it was suggested that individual magistrates could perform the task of taxing fees, LCD is not considering such a proposal. The responsibility for taxing fees is likely to be addressed in the regulation of all enforcement agents. Therefore the responses to this consultation will be considered in conjunction with responses to the Green Paper. The Government is committed to ensuring that any new structure, or fee scales within it, does not simply replace one bad system with another. |
Q.21 Do you agree that section 3 of the Distress for Rent Act 1689 as amended by Schedule 2 of the Administration of Justice Act 1965 should be revoked?
There were 38 responses (25.5%). 28 (73.7%) were in agreement but a few commented that there should still be a severe penalty to act as a deterrent. One respondent said that it would be necessary to retain pound breach as a criminal offence. The pound breach is obsolete and not widely comprehended. One respondent thought the wider review should consider the whole issue. 10 disagreed but two were of the view that it could be reformed and the judge should decide each case on its own merit, awarding suitable penalties.
Q.8 Q.22 Do you agree that ordinary compensatory damages would be appropriate for interfering with walking possession?
There were 33 responses (22.1%). 12 opposed. There must be sanctions to deter unscrupulous tenants from interfering. If section 3 was abolished and the tenant was liable to pay damages, it would render the walking possession agreement useless as the landlord may already sue for rent arrears of the same amount. This would be simpler than suing for the value of the goods removed from the agreement. The rental debt is usually undisputed whereas if a landlord has to sue for breach of a walking possession agreement, he has to prove the value of the goods, lawfulness of the agreement and the fact of the goods' removal. So it would be preferable to sue under the rent covenant in the lease rather than pursue the remedy of damages. The inevitable result would be that landlords would be reluctant to enter into walking possession agreements and would insist that goods be removed at the start of the distress procedure. The respondent with this viewpoint felt that the introduction of this proposal would adversely affect the remedy. Therefore, there should be enhanced damages. In order for interference to remain rare, a stronger penalty is required.
The judge could decide the penalty. 21 agreed with two respondents commenting it should be subject to all costs incurred in addition to the value of the goods.
| It remains the LCD's position that any remedies against the tenant for interfering with goods subject to walking possession should be ordinary compensatory damages. This is for the reasons set out in the consultation paper, that of proportionality and in order to ensure that excessive penalties do not increase the debt unduly. |
Q.23 Are there any other penalties which would be appropriate for a tenant for interfering with walking possession?
13 responses (8.7%). A respondent believed the appropriate remedy should be for the landlord to sue for violation of his interest in the goods seized and the proper measure of damages should be their value. If the penalty for breach of walking possession agreements is reduced, then landlords will be less willing to leave goods in such arrangements. It will then be more likely that goods will be removed from the premises immediately. Another proposed criminal proceedings if the tenant took fraudulent action. Four respondents wanted the court to ultimately treat interference as contempt. Two respondents thought pound breach could be retained for serious abuse. Another recommended that the landlord seek an injunction against the tenant. There could be injunctive relief with penal notice attached. Increasing levels of damages would only add to the debt. It was thought that a person guilty of an offence should be liable to a fine with a maximum level on a standard scale. Or the tenant could be compelled to return the goods or compensate their value to the landlord. It was submitted that the court could decide appropriate penalties. The judge's discretion could vary from a reprimand to a fine and most seriously, imprisonment. Sanctions could include directors' disqualification and punitive damages.
Two stated that the remedies a tenant is entitled to use against a landlord who distrains improperly should be the same for a tenant interfering with walking possession. Some respondents believed that it would avoid any allegations of discrimination under Article 14 of the ECHR by the tenant. Three disagreed stating that the damage the landlord suffers is not the same as that which a tenant might experience as a result of illegal distress. The court should have the flexibility to award the damage actually suffered by the party concerned. There should be reciprocal penalties for either party when interfering with distress for rent. As the landlord is only liable to pay damages for distraining improperly, it seems only rational that excessive penalties do not exist for the tenant.
| It remains the LCD's position that as a matter of principle we will be seeking to ensure that the liabilities faced by the landlord for distraining improperly are commensurate with the penalties faced by a tenant who interferes with walking possession. |
Distress for rent is being reviewed as part of the Lord Chancellor's ongoing reform of the civil justice system and the Review of Civil Enforcement. LCD will work towards producing a remedy based on the responses to this consultation paper and to the responses on bailiff law in the Green Paper Towards Effective Enforcement: A single piece of bailiff law and a regulatory enforcement structure.
There exists a close link between distress for rent and bailiff law, because much of bailiff law is rooted in the ancient common law of distress for rent. In addition, this procedure is currently guided by the Distress for Rent Rules 1988. These Rules allow for the certification of bailiffs which permits them to undertake distress for rent procedures. Certification is a judicial function carried out in the county courts, which is used by other departments and agencies as a mark of probity and regularity when specifying private enforcement routes, for example, parking fine enforcement. The Enforcement Review is likely to make recommendations as to the future role and regulation of bailiffs currently certificated under distress for rent.
The following is a breakdown by sector of numbers of respondents:
| Advice Organisations/Public Interest Groups | 5 |
| Enforcement Agencies/Bailiffs/Representative Organisations | 8 |
| Legal including judiciary and Court Service | 9 |
| Local Authorities/Representative Organisations | 5 |
| Property/Finance/Investment Companies | 102 |
| Solicitors/Legal Advisors | 2 |
| Trade/Professional Associations | 13 |
| Stakeholder Groups | 4 |
| Others | 9 |