Commercial rent arrears recovery - CRAR
Commercial landlords and their agents can normally recover rent arrears under CRAR (commercial rent arrears recovery). An alternative, when CRAR may not be used, to obtain a judgment and enforce under a writ of control.
With the enactment of the Tribunals, Courts and Enforcement Act 2007 in April 2014, distress for rent was replaced by CRAR - commercial rent arrears recovery.
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.
CRAR - only for rent and only with a lease
CRAR only applies to the rent (and any interest and VAT) payable under the lease. This means that items not directly attributable to the tenant’s possession and use of the premises, such as services charges, are not recoverable through CRAR. There must also be a written lease in place and any contract or lease that seeks to amend or avoid the CRAR provisions will be void.
It must be possible to calculate the rent due with certainty and the arrears must be for at least seven days' of rent. This is called the “net unpaid rent” and is what is owed once interest, VAT and any permitted deductions are made. These are deductions, recoupment or set-off that a tenant would be entitled to claim if the landlord takes rent arrears action.
CRAR - only for commercial premises
CRAR may only be used for commercial premises. Some premises, for example pubs, also have residential accommodation. Provided that the residential part has a separate entrance and a separate lease, then CRAR may be used to recover the rent arrears on the commercial lease. A court order is not required. However, if the lease covers mixed use of commercial and residential areas of the property, the landlord will need to obtain a judgment to recover the arrears.
CRAR - Giving notice to tenants and sub tenants
If the landlord wants to use CRAR, he has to give the tenant 7 days' notice of enforcement after the rent becomes overdue. The rent must still be unpaid at the time the notice is served, as well as immediately before any goods are seized. Once notice has been served, the tenant may apply to court for a set aside or delay of execution. The notice must be served, either by post, hand, fax and electronic communications such as email. The landlord can tell sub tenants to pay him their rent directly, but must give them at least 14 days' notice.
CRAR - enforcement, seizure and sale
Under CRAR, only Certificated Enforcement Agents (previously known as Certificated Bailiffs) are permitted to seize goods belonging to the tenant to recover rent arrears. They can enter through an open or unlocked door or other normal means of entry on any day of the week between 06:00 and 21:00, or the tenant’s normal business hours, if different.
Only goods belonging to the tenant on the demised premises, i.e. the property covered by the lease, may be seized. The Certificated Enforcement Agent may not take control of goods with a value greater than the rent owing plus the costs and he must give the tenant a valuation of the items seized. Tools of the trade used by sole traders will be exempt up to a value of £1,350. Should the seized items go to sale, they must be sold at public auction and seven clear days' notice of the sale must be given to the tenant.
Commercial rent arrears recovery under a High Court writ of control
In addition to CRAR, commercial landlords also have the option to go through the court system and obtain a judgment, which may then be enforced by a High Court Enforcement Officer under a writ of control.
While the court option will take longer than CRAR, there may be circumstances where it is the more appropriate route:
- If you wish to recover other sums of money beyond the rent, for example service charges, insurance etc
- If there is a licence in place, instead of a landlord-tenant agreement
- Where the tenant has moved their business to another location: a writ of control permits the enforcement agent to go to their new business premises to take control of the tenant's goods. Under CRAR, only goods at the leased premises can be taken into control