The CRAR ( Commercial Rent Arrears Recovery ) procedure was introduced by the Tribunal, Courts and Enforcement Act 2007 and has been in place since 2014. CRAR replaced the quite ancient and some would say archaic right of landlords to seize the goods of non -paying tenants.
CRAR is a legal process that enables landlords to collect rent owed to them without the need to obtain a court order, however it only applies to commercial property. CRAR cannot be used in a building where there is any residential element to the premises or lease.
What is The Right To Forfeit?
Forfeiture allows landlords to terminate the lease where their tenant has breached their obligations (i.e. the obligation to pay rent). Forfeiture of lease on commercial premises is usually effected by peaceable re-entry (i.e. taking possession and changing the locks).
The right to peaceably re-enter must be expressly included in the terms of the lease, and these terms often contain a grace period, wording such as;
“If the rents hereby reserved, or any party thereof, shall be unpaid for a period of 21 days after becoming payable (whether demanded or not) then….
Upon effecting peaceful re-entry the lease is also terminated or “Determined”.
Does using CRAR Waive The Right To Forfeit ?
If the right to forfeit arises out of rent arrears, this can be waived ( lost) where the landlord is aware of the breach of the tenancy but acts in such a way that unequivocally indicates the lease is continuing.
The conventional wisdom held by many in the enforcement industry is that initiating the CRAR process constitutes such an unequivocal act, and therefore the right to forfeit for the rent relating to that CRAR demand is waived. However, that is not necessarily the case. The Landlord CANNOT waive a right to forfeit before that right exists.
Let us assume the right to forfeit arises AFTER a set grace period, say 21 day (usually the case) and the Landlord does something to imply the continued existence of the lease (e.g. issues a demand for rent through CRAR after 7 days). Although that act would be considered as amounting to waiver of the right to forfeit if it were done AFTER the 21 day grace period had expired, it does NOT, if done BEFORE the grace period elapses.
By the time the right of peaceable re-entry arises at the end of the grace period, the tenant already owes the rent; therefore, the Landlord may demand those arrears DURING and continue AFTER the grace period without waiving the right to forfeit the lease.
If CRAR has been exercised within the grace period after the rent fell due, (usually 21 days but dependant on terms of lease) the right to forfeit will NOT have been lost if the rent remains unpaid.
Case Law: Debtors v Joyner [1995] 1 WLR 1127
The law relating to forfeiture of lease is complex and Landlords should consider their legal position if they are thinking of forfeiting a commercial lease. They should tread carefully in taking any action or communicating in any way with the tenant that might be taken as indicating the lease is continuing.
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