Commercial Rent Arrears Recovery (CRAR) is a statutory procedure which allows landlords of commercial premises to recover rent arrears by taking control of the tenant’s goods and selling them. CRAR came into force on 6 April 2014 and applied with immediate effect to all new and existing commercial leases from that date onwards.
In order to use CRAR, a landlord must provide 7 days notice of enforcement. Once this period has expired, Certificated Enforcement Agents (as opposed to other types of bailiffs) may enter the property (through an open or unlocked door) in order to seize goods.
CRAR applies whether or not reference is made to it in the lease.
Sub-tenants – Landlords can still require sub-tenants to pay rent directly to clear any rent arrears, using a statutory procedure very similar to CRAR (but 14 days notice is required rather than 7).
Anti-avoidance – There are anti-avoidance provisions in place to prevent landlords from modifying, changing or substituting the CRAR procedure in order to recover rent arrears. Landlords must use the CRAR procedure. Any other procedure is void and potentially criminal.
CRAR can still be used during the Coronavirus pandemic as a means of collecting rent as it has not been stopped by the 2020 Coronavirus Act, whilst repossession by forfeiture has.
How to enact the CRAR process
Before claiming unpaid rent from a commercial tenant, you must remember the following:
- The arrears must be at least seven days’ worth or more at the time the notice is served and at the time of enforcement
- You do not have the right to seize your tenant’s goods yourself; they can only be seized by a certified enforcement agent
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 public auction.
Who can use CRAR?
As a general rule, only landlords of commercial premises, where the tenant remains in occupation of those premises, can use CRAR. There must also be a lease in writing. A contractual licence to occupy will not suffice.
A minimum sum equivalent to 7 days’ rent needs to be outstanding before any action can be taken, and notice of enforcement containing prescribed information must be given to the tenant at least 7 clear days before any goods are taken. It is possible to ask the court to reduce the notice period if there is a risk of tenants removing goods from premises (eg during an insolvency).
Other requirements of CRAR include:
- Details must be included in notice served on the tenant
- Notice must be served in a specific way
- Time limit for seizing goods from the notice being served (12 months)
- Goods can only be seized at certain times
- Only certain types of goods can be seized (and an inventory must be made)
- Goods seized must be valued and not be sold for at least 7 days
Tenant rights under CRAR
Firstly, you must remember that a notice of enforcement binds goods to remain on the property, meaning you cannot sell or remove them. You can, however, delay enforcement by applying to court for a delay of execution or a set aside.
It is possible to enter a controlled goods agreement in order to repay what you owe over time. Under such an agreement, the goods will remain on the premises, but your landlord’s enforcement agent will be able to remove them if you default on your agreed repayments.
If goods are taken, the enforcement agent must provide you with an inventory of everything seized as specified by section 33 of the Taking Control of Goods Regulations 2013.
If your lease has expired, your landlord can only use the CRAR process if:
- The lease ended within the last six months;
- The lease did not end by forfeiture;
- The rent was owed by you at the time the lease ended;
- You still possess some of the goods formerly located on the premises;
- You occupy the goods under a commercial lease; and
- Your old landlords was, at the time the lease ended, entitled to immediate reversion
Being unable to pay debts, such as commercial rent, when they become due is a warning sign of insolvency. If this describes your company’s situation, it is highly recommended that you seek insolvency or turnaround advice from a professional firm.
County Enforcement
If you are a landlord and you’d like to learn more about Commercial Rent Arrears Recovery and how County Enforcement can help you, get in touch with our team today.
In accordance with the Taking Control of Goods Regulations 2013, County will serve a Notice of Enforcement giving no less than 9 clear days to resolve the amount outstanding.
Should the outstanding balance not be resolved one of County’s experienced enforcement agents will attend the demised premises and legally recover the outstanding balance, seize goods, or remove goods for the purpose of sale.