The procedure by which a landlord may recover arrears of rent in relation to marketable demesne was unnaturally changed several times agone. Chapter 2 of the Bars, Courts and Enforcement Act 2007 abolished the common law right to distrain for arrears of rent, replacing it with the marketable rent arrears recovery procedure (‘CRAR’). But what has been the impact of this change on whether a landlord taking enforcement action to recover arrears waived his right to penalty of a parcel?
Background
There are colorful differences between the two remedies. Unlike torture at common law, CRAR is only available to landlords of marketable demesne. CRAR, unlike torture, is exercisable only in relation to rent, which doesn’t include totalities reserved within the parcel in respect of rates, council duty, services, repairs, conservation, insurance or other ancillary matters. The landlord must give seven days’ notice before exercising CRAR; whereas for torture no notice is needed except in certain limited situations. Under CRAR there’s a demand for at least seven days’arrears to be owing at two distinct times both before notice is served and before goods are actually seized;
Whereas torture allowed seizure of goods incontinently upon addendum of any arrears. Likewise, under CRAR, a landlord is needed to give 7 days’ notice of trade of goods, as opposed to five under torture. The minimum timeframe for recovery of rent under CRAR is thus 21 days. These changes (and others) are said to have been introduced in response to mortal rights-affiliated enterprises expressed by tenants about torture, as well as to rebalance landlords’ rights with those of other creditors.
Disclaimer of penalty
despite the differences between the two remedies, the thinking amongst interpreters has been that CRAR, like common law torture, would waive a landlord’s right to claim penalty. But the courts hadn’t considered the matter until the position was verified in Brar v Thirunavukkrasu.
As is well established, when the right to lose arises, a landlord must handpick whether to apply his right to penalty and thereby treat the parcel as at an end, or to affirm the contract by doing some unambiguous act recognising the uninterrupted actuality of the parcel. The landlord must know of the data upon which his right to re-up arises, and his act of disclaimer must be communicated to the tenant.
The Brar decision
In Brar, daily rent went overdue on 25 December 2015. On 18 January 2016, the landlord instructed enforcement agents to exercise their powers under CRAR to attend the demesne and seize goods (but failed to give notice to the tenant, as needed). On 1 February 2016 (inaptly stated in the judgment as 1 February 2015), the agents properly attended and seized goods. On 4 February 2016, the tenant paid the outstanding quantum to the enforcement agents in full. On 12 February 2016, the landlord purported to lose the parcel by peaceable-entry.
At first case in the County Court at Central London, HH Judge Madge decided that CRAR, like torture, operated as a disclaimer of a landlord’s right to penalty. Consequently, he held that the purported penalty had been unlawful and ordered damages against the landlord for trespass and breach of covenant. Mr Justice Marcus Smith dismissed the landlord’s appeal to the High Court.
The landlord appealed again and the case came before the Court of Appeal. The Master of the Rolls gave the supereminent judgment.
The Court of Appeal dismissed the landlord’s appeal. It held that the fact that CRAR continues to be exercisable up to six months after the end of a parcel (if certain conditions apply) didn’t mean that the exercise of CRAR wasn’t an unambiguous act affirming the actuality of the parcel. Under the 2007 Act, CRAR can noway be exercised after the parcel has been determined by penalty.
But the parcel had numerous times to run and hadn’t barred the tenant’s rights of renewal under the Landlord and Tenant Act 1954.
Thus, the only way the parcel could have been determined was by penalty. The exercise of CRAR must, thus, have recognised the actuality of the parcel. Also, the fact that CRAR may, in certain circumstances, be exercised after the end of the parcel couldn’t logically throw any light on whether the exercise of CRAR before the end of a parcel operated as a disclaimer.
