Protective distraint
by David Carter on 26 May 2010
Distraint, also known as distress, is the seizure of assets in order to obtain payment of outstanding rent on commercial properties.
Protective distraint is a variation on this that may be used by commercial landlords when their tenant is in arrears with rent. It allows them to make an agreement for the payment of rent arrears, whilst ensuring that the landlord has the right to sell the seized assets should the tenant default. This also gives the tenant the opportunity to continue trading in the premises, which may be in the best interests of both parties.
Should arrears occur, the landlord may appoint a certificated bailiff to arrange protective distraint in conjunction with the tenant. The certificated bailiff will arrange a time to visit the tenant (normally they do not give notice of a visit) and will compile an inventory of assets
The certificated bailiff then draws up a walking possession agreement which is signed by the tenant. This will be renewed at agreed intervals by the certificated bailiff, until the need for protective distraint has gone.
This means that, should the tenant default on the agreed payment, the landlord may, without the need for a judgment, instruct the certificated bailiff to enter, by force if necessary, to remove and sell the goods to clear the arrears. This normally provides the tenant with strong motivation to stick to the agreement.
The landlord, therefore, is protecting their right to be paid the rent due in advance of other creditors. For example, HMRC or other bailiffs might attempt to distrain, but the walking possession agreement will show that the landlord has first claim to these assets and is, in effect, a secured creditor.
The lease – and it does only apply to commercial leases and not to licences – must be in arrears.
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