In our last post, we discussed one of the biggest faux-pas in exercising the landlord's right to distress. In their zeal to recover arrears in rent, some commercial landlords have simultaneously terminated the lease and thus, by their own hand, have rendered their distress action illegal. This week, we examine yet more technical details that, if not carefully observed, risk jeopardizing the interests of landlords who turn to this self-help remedy.
Know What Is Saleable And What Is Not
Distraint is not an inventory free-for-all. Certain tenant goods are exempt from distraint. Chattels (moveable goods) are permissible. Fixtures and improvements are not. Only goods belonging to the actual tenant are salable. Landlords must be careful to determine what belongs to whom before proceeding with the sale.
Seize No More Than Is Reasonable
A landlord may seize and sell only the quantity of goods sufficient to pay for the arrears of rent and the costs associated with the distress action, such as for appraisals. Arriving at an accurate estimate is often tricky and, if not handled carefully, leaves a landlord open to liability.
Sell Distrained Goods At Fair Prices
Distrained goods cannot be sold off in haste at bargain-basement prices. After allowing for a five day cure period after seizure, landlords are required to seek estimates on fair market values by two separate appraisers. The sale can then proceed, taking care to secure the best possible price. Landlords are also prohibited from creating a conflict of interest by purchasing the distrained goods themselves.
Clearly, the many formalities encumbering rent distress make it advisable for landlords to include a legal advisor as part of the collective "self" in this self-help remedy.