If you’re a commercial landlord confronted with unpaid rent by a tenant, you can recover rent arrears under CRAR. In business tenancy agreements, there is a specialised recovery framework that allows arrears to be recovered by enforcement action. This is the procedure for recovering commercial rent arrears (known as CRAR). When using CRAR you can instruct a certified enforcement agent to enter the tenant’s property and seize the goods. A court order is not required for the CRAR process.
What is CRAR?
Earlier the common law regime of distress was a self-help remedy originally available to landlords whose tenants had fallen behind on rent payments, permitting them to enter the leased premises and seize and sell goods up to the value of the monies owed with no prior notice or court order. Although this was a quick, effective, and inexpensive remedy for landlords, it was deemed to be excessively tough for tenants, leading to the decision to abolish this privilege and replace it with a new one.
On April 6, 2014, as part of wider reforms introduced by the Government the ancient common law right of distress for rent was abolished and replaced by a new statutory procedure known as Commercial Rent Arrears Recovery or CRAR.
Section 72 allows a commercial landlord to use Schedule 12 (taking control of goods) of the TCE Act to recover rent payable under the lease from the tenant, without needing to go to court.
Giving Notice to Sub-tenants |
In order to use CRAR, a landlord must provide 7 days’ notice of enforcement. Once this period has expired, Certificated Enforcement Agents may enter the property (through an open or unlocked door) to seize goods.
CRAR applies whether or not reference is made to it in the lease
Sub-tenants | Using a legislative system similar to CRAR, landlords can still demand sub-tenants to pay rent directly to clear any rent arrears (but 14 days’ notice is required rather than 7).
Anti-avoidance | To prevent landlords from modifying, changing, or substituting the CRAR method in order to recover rent arrears, anti-avoidance provisions have been put in place. The CRAR method must be followed by landlords. Any alternative technique is null and void, as well as potentially illegal.
CRAR – application only for rent with a lease
CRAR only applies to the rent due under the lease (together with any interest and VAT). This means that items such as services charges, which are not directly attributable to the tenant’s ownership and use of the premises, are not recoverable under CRAR. A documented lease must also be in existence, and any contract or lease that seeks to change or evade the CRAR terms will be void.
The rent due must be calculable with certainty, and the arrears must amount to at least seven days’ rent. This is referred to as the “net unpaid rent,” and it refers to the amount owed after interest, VAT, and any other legal deductions have been taken into account. If the landlord pursues rent arrears action, a tenant may be able to claim deductions, recoupment, or set-off.
CRAR – applicable to commercial premises
Only commercial premises are permitted to use CRAR. Some businesses, such as bars, also provide residential accommodation. CRAR may be used to recover rent arrears on the commercial lease if the residential portion has a separate entry and lease. It is not necessary to obtain a court order. If the lease covers both commercial and residential sections of the property, however, the landlord will need to secure a judgment in order to recover the arrears.
Limitations to the application of CRAR |
- CRAR only applies to premises for commercial use – not mixed-use or residential premises
- CRAR can only be used to recover principal rent – it cannot be used to recover other sums (eg service charges and insurance premiums)
- CRAR can only be carried out by Certified Enforcement Agents following the statutory procedure
How to enact the CRAR process?
As a landlord you must remember before claiming unpaid rent from a commercial tenant, you must |
- The rent arrears must be at least seven days’ worth or more at the time the notice is served and at the time of enforcement
- Only Certificated Enforcement Agents have the right to seize your tenant’s goods to recover rent arrears.
- Once you have found an authorised enforcement agent, you will need to fill out a Warrant of Control form to enable them to begin enforcement action.
- The enforcement agent will then take over the process, issuing a seven-day notice to your tenant in the first instance.
- If the rent remains unpaid at the time of enforcement, the agent will enter the property and take control of certain goods located thereon to be sold at a public auction.
- The Certificated Enforcement Agents can enter the property through an open or unlocked door on any day of the week between 06:00 and 21:00, or during the tenant’s normal business hours, if different.
- Only goods belonging to the tenant may be seized for example the property covered by the lease, car or other vehicle used by the tenant, any other valuable. However, they can’t seize |
- things you need, such as your clothes, cooker or fridge
- work tools and equipment which together are worth less than £1,350
- someone else’s belongings, such as your partner’s computer
- The Certificated Enforcement Agent may not seize assets worth more than the rent owed plus costs, and he must provide a valuation of the items taken to the tenant.
- If the seized things are to be sold, they must be sold at public auction and the tenant must be given seven clear days’ notice of the sale.
- Who can use CRAR?
As a general rule, only landlords of commercial properties when the tenant is still using their property can use CRAR. A written lease is also required. A contractual right to occupy is insufficient.
Before any action can be taken, a minimum of 7 days’ rent must be owed, and a notice of enforcement containing prescribed information must be provided to the tenant at least 7 clear days before any goods are taken. If there is a risk of tenants removing things from the premises, you can ask the court to shorten the notice time (e.g., during insolvency).
Can a commercial tenant’s assets be seized at other locations to pay rent arrears?
Assets can only be seized at the lease address under regular conditions under the CRAR procedure. A County Court judgment, on the other hand, allows for enforcement at any address where items are located at the commercial tenant’s business.
Commercial rent arrears recovery under a High Court writ of control
In addition to CRAR, commercial landlords can seek a judgment through the court system, which can subsequently be executed by a High Court Enforcement Officer under a writ of control.
While going to court will take longer than going through CRAR, there may be times when it is the better alternative:
If you want to collect money other than rent, such as service costs, insurance, and so on
- Instead of a landlord-tenant agreement, if a licence is in place.
- When a tenant moves their business to a new location, a writ of control allows the enforcement agent to proceed to the new address and seize the tenant’s belongings. Only commodities at the leased premises can be taken under control under CRAR.
Get in touch with our experts now if you’re a landlord and want to learn more about Commercial Rent Arrears Recovery and how Shergroup enforcement may help you.
We recommend responding quickly because the longer you wait, the more difficult it will be to recover the unpaid rent. To get our clients paid, Shergroup uses a combination of enforcement, litigation, and insolvency strategies. We can help you with any paperwork by contacting one of our business solution advisors, who will be happy to discuss your situation. The good news is that instructing Shergroup to begin collecting rent is entirely free. On a “no win, no fee” premise, the remaining fees can be collected.
For businesses whose landlords are pursuing them for commercial rent payments, we may be able to recover late payments on the same “no win, no fee” premise. For firms that want additional funding
quickly, we can offer to provide invoice lending options. So don’t give up hope; contact us for help and we’ll assist you in enforcing the CRAR notice and recovering your rent arrears.
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