Raising the minimum debt to £5,000 prevents insolvency for minor debts or using statutory demands as a scare tactic. However, following the proposed change, where arrears do not exceed the limit of £5,000, landlords will likely suffer as a result of this often effective remedy no longer being available.
The remedy of distress was replaced by the Commercial Rent Arrears Recovery procedure (CRAR) for commercial tenancies. Distress was not only a quick and low-cost method of recovering arrears, but also a very useful for a landlord as it had potentially serious adverse consequences for a tenant. The CRAR procedure is much more drawn out and expensive for landlords.
Following the changes, where there are arrears which total less than the proposed statutory limit of £5,000, there will still be methods of recovery available to a landlord, including forfeiture, a small money claim through the County Court, CRAR, and in some instances recovery from the guarantor or using some of the rent deposit although some of these methods may lead to other complications so need careful consideration.
The change to the limit for statutory demands is of equal concern where small debts are owed for supplies made to other businesses. It will be essential to keep a closer watch on debt levels and prevent them rising. If customers are in difficulty, it will be easier to stop supply than it will to recover an increasing debt until it has reached a financially painful point for your business.