Rent a Remedy CRAR ving Out Solutions for Commercial Arrears of Rent

Commercial Rent Arrears Recovery (CRAR) in the United Kingdom

Have you ever wanted to know more about the legal basis behind the hit Channel 5 TV show ‘Can’t Pay? We’ll Take it Away’? What a silly question, of course you have! The TV show is a great example of the Commercial Rent Arrears Recovery (CRAR) procedure in action. CRAR is a legal process in the United Kingdom that allows landlords to recover overdue rent from tenants of commercial properties. This mechanism is a crucial way for landlords to ensure they receive the payments they are owed, especially in challenging economic times. Understanding CRAR is essential for both landlords and tenants to navigate their rights and obligations effectively.

What is CRAR?

CRAR was introduced under the Tribunals, Courts and Enforcement Act 2007 and came into effect in April 2014. It replaced the ancient common law remedy of distress for rent. CRAR allows landlords to instruct enforcement agents, commonly known as bailiffs, to take control of a tenant’s goods and sell them to recover unpaid rent. This process is strictly regulated by the relevant enforcement agencies to ensure fairness and transparency.

Enforcement agents can only seize goods that belong to the tenant and are located on the leased premises therefore meaning that goods owned by a third party cannot be seized.

Eligibility and Conditions

For CRAR to be applicable, several conditions must be met:

1. Commercial Lease: The property must be leased for commercial purposes. CRAR does not apply to residential properties or mixed-use properties where the residential part is significant.

2. Written Tenancy Agreement: There must be a written lease agreement in place.

3. Rent Arrears: The rent must be overdue. CRAR can only be used to recover pure rent, including any VAT chargeable on said pure rent but excludes recovery of service charges, insurance, or other ancillary costs. For the purposes of calculating whether the arrears are above the requisite minimum 7 days’ worth of rent, only the pure rent is considered.

4. Minimum Arrears: The amount of rent arrears must be at least seven days’ worth of rent.

The CRAR Process in Brief

1. Notice of Enforcement: The landlord’s enforcement agent must serve a Notice of Enforcement to the tenant, giving them at least seven clear days (excluding Sundays and bank holidays) to pay the arrears.

2. Taking Control of Goods: If the tenant fails to pay within the notice period, enforcement agents can visit the property to take control of goods. They can enter the premises peacefully or by using reasonable force in certain circumstances.

3. Sale of Goods: The seized goods can be sold at public auction to recover the owed rent. The proceeds from the sale are used to cover the arrears and any enforcement costs, with any surplus returned to the tenant. A Notice of Sale must be served on the tenant and a certain time period passed before the seized goods can be sold.

Consequences of CRAR on forfeiture

It is important to note that, where a landlord has the right to forfeit a lease as a result of the tenant’s breach, the landlord has the option to either enforce the right to terminate the lease or to continue the lease. If a landlord pursues CRAR as a method of rent arrears recovery, they waive their right to forfeit the lease and therefore the remedy should be used with caution.

Tenant’s Rights and Remedies

Tenants have certain protections under CRAR. They can apply to the court to set aside the enforcement action if they believe it is unjustified. If the tenant pays back the arrears plus the enforcement costs before the goods are sold, the sale of the goods cannot take place and the tenant must be given the opportunity to collect its goods. Additionally, tenants can negotiate payment plans with landlords to settle arrears without the need for enforcement action.

Conclusion

CRAR provides a structured and regulated method for landlords to recover overdue rent from commercial tenants. While it offers a clear path for landlords to reclaim owed money, it also ensures that tenants are treated fairly and have opportunities to address arrears before enforcement actions are taken. Both parties should be aware of their rights and responsibilities under CRAR to manage commercial lease agreements effectively.

Please note this blog is intended to provide general information only and does not constitute legal advice. If you have a query in relation to the matters discussed in this blog, please get in touch with our friendly team.