Distraint of Goods: A self-help remedy for commercial Landlords

An article by Graham Hall

South Australian commercial landlords should be aware of this practical self-help remedy to recover rental arrears from a defaulting tenant – the right to distrain.

COVID-19 has not made life any easier for many commercial tenants and a landlord may find themselves with a defaulting tenant from time to time – commonly, on account of a failure to pay rent under the lease. 

A commercial landlord has common law rights, as regulated by the Landlord and Tenant Act 1936 (SA) (Act) to distrain against the tenant’s goods in the leased premises for rent arrears.

What is a distraint?

Put simply, under the right to distrain (distress), a commercial landlord with a tenant in rental arrears may, whilst the lease is ‘on foot’, enter the lease premises, take control of the tenant’s goods in the premises, and sell them by public auction for the purpose of recovering those rental arrears.

The right to distraint is described as a self-help remedy as a landlord is not required to commence court action to undertake a distraint.

A right to distrain does not terminate the lease. In fact, it is an essential element of the right to distrain that the lease is and remains ‘on foot’ at the time of its exercise – although it is commonly the case that a landlord will also choose to subsequently terminate the lease after executing (completing) the distraint.

What are the benefits of a distraint?

A landlord may choose to exercise a right to distrain for multiple practical reasons, some or all of which may be relevant or useful having regard to the facts of the particular tenancy, which can include:

  • (Recovery of unpaid rent) Distraining against the tenant’s goods may afford the landlord greater leverage against the tenant in the recovery of rent arrears – a tenant may not wish to lose control of the very goods it needs to operate its business thus potentially incentivising a tenant to pay some or all of the arrears. Some tenants may ‘find’ the arrears and pay them to the landlord resulting in the distraint process being called off.
  • (Self-help remedy) The landlord is not required to commence court action to exercise this remedy – potentially avoiding time delays and costs.
  • (Recovery of costs) The Act provides for the recovery of the landlord’s costs of the distraint from the proceeds of sale of the auctioned goods.
  • (Useful for re-letting) The Act gives a landlord the right to remove the goods distrained from the leased premises potentially providing the landlord with more control over the premises for re-letting purposes – removal of the tenant’s goods from the premises can assist the landlord in preparing the premises for re-letting – should the landlord also elect to terminate the lease.

Undertaking a distraint can (but not always) provide a landlord with real results. A tenant faced with a warrant of distraint and, as is usually the case, a bailiff on site, clearly indicates the landlord means business.

The Act sets out the procedure for undertaking a distraint and the rights of the various participants must be strictly adhered to and advice is essential.

If you would like to know more about the remedy of distraint and if it may be of use to you or your landlord client in respect of a commercial lease in South Australia, please contact Graham Hall on 8206 8444 or email graham@commercialandlegal.com.au

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