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What does the new creditor bankruptcy threshold mean for commercial landlords?

New rules mean that creditors can only serve a statutory demand for debts of £5,000 or more. This represents a huge increase from the previous £750 threshold, but what does the jump mean for commercial landlords?

Losing power?

These changes are viewed by some observers as part of a general decrease in landlords’ ability to force tenants to pay their debts.

Last year's Commercial Rent Arrears Recovery (CRAR) rules replaced the 'remedy of distress', which had allowed landlords to recover rent arrears by seizing and selling goods. Tenants must now be given seven days’ notice before such measures are applied, and must then be given another week’s notice prior to goods being sold.

This latest change to the creditor bankruptcy threshold takes another weapon from commercial landlords' arsenal. Given that statutory demands require a legal response within 21 days, some landlords had been using this device to encourage late paying tenants to meet their obligations. With the new threshold, debts up to £5,000 could be much harder to recover.

Alternative systems

While there's no doubt that the debt collection landscape is shifting, commercial landlords aren’t toothless yet. In cases where debt is below the new threshold, it's still possible to turn to the courts for judgement. While this is likely to result in additional costs, it’s important to tackle debts early rather than risk things spiralling out of control.

Landlords can also turn to ethical Enforcement Agents like Dukes Bailiffs. By hiring Enforcement Agents to pursue unpaid rents, property owners can move the tricky part of debt collection into the hands of experts.

Structural solutions

Commercial landlords must consider their future reputation and cash flows when deciding how to react to the new threshold. This means having efficient systems in place to collect rent, and engaging with tenants in a firm but fair manner.

Clear lines of communication are key, and a reliable Enforcement Agent can be an invaluable partner in the long run. Our advisors help to build payment plans that meet the needs of all parties, and we can pursue court-enforced collection routes to deal with extreme cases.

If you're a commercial landlord who's worried about changes to debt collection legislation, contact Dukes Bailiffs to discuss how our services could help your business today.

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