Relief for the “Distressed Landlord”

Jason Teoh offers an antidote against errant tenants

 

 

INTRODUCTION

An errant tenant is every landlord’s nightmare. When faced with a situation where the tenant neglects or refuses to pay outstanding rents, many landlords make the mistake of resorting to self-help measures such as locking the tenant out of the premises or forcefully evicting the tenant. More often than not, such landlords find themselves sued for trespass by the errant tenant instead.

 

Section 7(2) of the Specific Relief Act 1950 specifically requires a landlord to obtain a court order before he can recover possession of the property from a tenant. The question then is – what are the legal remedies available to a “distressed landlord” when his tenant refuses to pay rent but continues to occupy the premises.

 

 

DISTRESS ACTION

One of the remedies available to a landlord against a tenant who falls into arrears in payment of rent is to levy distress for rent – in other words, sending in the court bailiff to seize and sell the tenant's goods in satisfaction of the arrears.

 

The landlord’s right to distress is governed by the Distress Act 1951 (“the Act”). Section 5(1) of the Act permits a landlord to apply to a Judge or a Registrar for the issue of a warrant of distress to recover rent due and payable to the landlord by a tenant of any premises for a period not exceeding 12 completed months of the tenancy preceding the date of the application.

 

 

THE PROCEDURAL STEPS

When a tenant fails to pay any rent due to the landlord, the first step is for the landlord to make a demand on the tenant for the overdue rent to put the tenant on notice that unless the outstanding rent is paid, the landlord may resort to legal action to enforce his rights. If the tenant does not pay the outstanding rent, the landlord may apply to the court for a warrant of distress ("Writ of Distress"), through his solicitors.

 

As an application for a Writ of Distress can be made on an ex parte basis, the tenant need not be forewarned of the steps taken by the landlord to recover overdue rent. The landlord is required to file an affidavit to state the grounds for his application.

 

A Writ of Distress confers authority on the bailiff to use reasonable force to enter upon the demised premise and to impound goods to the value of the rent owed, so as to compel the tenant to pay up. The landlord may be required to pay into court such sum of money as the court considers necessary to cover the fees and expenses of the bailiff.

 

The bailiff is required under the Act to immediately make an inventory and approximate valuation of any property seized under a Writ of Distress. The bailiff will then issue a notice of the seizure to the tenant and provide him with a copy of the inventory and valuation. The notice will also inform the tenant of the amount due under the writ and that the property seized will be sold at a time and place specified in the notice, unless the tenant pays the amount due within 5 days from the date thereof, or obtains an order to restrain such sale.

 

If the tenant fails to pay the amount due within the stipulated time or to obtain an order to restrain the sale, the bailiff will sell the property seized by public auction. The proceeds of sale will be applied first, in payment of the bailiff's fees and expenses and thereafter, in satisfaction of overdue rent and costs. Any balance must be returned to the tenant.

 

A distress will be lifted upon the tenant paying the arrears of rent in full or to the satisfaction of the landlord.

 

 

ADVANTAGES OF A DISTRESS ACTION

Firstly, a distress action is a relatively straightforward proceeding.

 

A landlord may distrain for arrears of rent even after the determination of the tenancy provided that the tenant is still in occupation of the premises or if the goods of the tenant are still on the premises.

 

Another interesting feature of a distress action is that Section 20(1) of the Act gives the landlord priority for payment of an amount up to 6 months’ rental over moneys owed by the tenant to other judgment creditors who may have attached the tenant's property for the recovery of judgment sums before the landlord has executed his Writ of Distress. This priority is nevertheless subject to any prior claims by the Federal Government or any State Government.

 

 

DISADVANTAGES OF A DISTRESS ACTION

A Writ of Distress does not terminate the tenancy. Accordingly, if the tenant subsequently fails to pay rent, the landlord may have to resort to yet another distress action to recover his dues. Further, a distress action could be a lengthy and costly exercise if the tenant contests the action.

 

A landlord should also be cognizant that certain goods are exempt from seizure under Section 8 of the Act. They include (a) the tenant's necessary wearing apparel and necessary bedding for himself and his family; (b) tools and implements where there is other moveable property in the premises sufficient to cover the amount due and costs; and (c) goods in the tenant's possession which are to be dealt with in the ordinary course of his trade or business.

 

Wrongful seizure of goods will expose the landlord to an action of trespass by lawful owners of the goods.

 

It should also be noted that the amount recoverable under a distress action is limited to 12 months' rent.

 

 

CONCLUSION

Notwithstanding that there are risks involved in a distress action, it is usually an effective tool for a distressed landlord to recover arrears of rent from an errant tenant if the tenant has sufficient seizeable assets in the demised premises.

 

 

 
ACCOLADES & AWARDS

Asian Legal Business Malaysia Law Awards 2018

alb-mla-2018-winner

Skrine has been ranked as Arbitration Law Firm of the Year and Maritime Law Firm of the Year.

>> READ MORE

The Chambers Asia Pacific 2018 Rankings

Skrine has been ranked as Leading Firm for Dispute Resolution, Intellectual Property and Projects, Infrastructure & Energy.

>> READ MORE

The Legal 500 Asia Pacific 2018 Rankings

Skrine is pleased to announce that the Firm has achieved seven Tier 1 practice area rankings in The Legal 500 Asia Pacific 2018.

Our Tier 1 rankings are in the following areas: 
  • Banking and Finance
  • Corporate and M&A
  • Dispute Resolution
  • Intellectual Property
  • Technology, Media & Telecommunications
  • Real Estate and Construction
  • Labour and Employment

Skrine was also listed as one of the leading firms in the areas of Projects & Energy, and Shipping. 

Four Skrine partners were ranked as leading lawyers in their respective areas. 

>> READ MORE

PDPA NOTICE

English | Bahasa Malaysia