FREQUENTLY ASKED QUESTIONS

Commercial Rent Arrears recovery, otherwise known (CRAR) allows a landlord to instruct an enforcement agent – in writing – to enter the premises of a tenant who is in arrears with their rent. A landlord can instruct them to seize and sells goods from the tenant in order to recover the equivalent value of the rent arrears.

The regulations are set out in legislation
https://www.legislation.gov.uk/ukpga/2007/15/part/3/chapter/2/crossheading/commercial-rent-arrears-recovery
Usually the arrival of bailiffs to a tenant’s premises is enough encouragement for them to pay off the arrears to their landlord without their goods having to be removed and sold.

As soon as the tenant is 7 days in arrears the CRAR procedure can be used but only for commercial premises. Mixed use premises, such as pubs that also have residential accommodation as part of the premises may be excluded. However provided that the residential part has a separate entrance and is under a separate lease, then CRAR may be used to recover rent arrears on the commercial element of lease. No court order is required. If the lease jointly covers commercial and residential areas of the property, CRAR may not be used. The landlord will need to apply for a money judgment to recover the arrears.

Landlords and managing agents can instruct CRAR London Certificated Enforcement Agents (Bailiffs) to act under CRAR regulations. Under previous regulations they were able to do so themselves but this is no longer the case. seize goods belonging to the tenant to recover outstanding rent arrears. They can enter through an open or unlocked door or any 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 they are outside these hours.

Yes we can exercise CRAR  on sub tenant, but only if the landlord has first served a notice under Section 81 of The Tribunals, Courts, and Enforcement Act 2007, and that the notice time limit has expired. This notice requires the sub-tenant to pay the rent which it owes directly to the landlord rather than the intermediate tenant. A section 81 notice takes effect 14 clear days after service of the notice. We suggest you contact CRAR London immediately if you are faced this situation.

Only goods owned by the tenant can be seized under CRAR. This excludes goods owned by a sub-tenant or other third-party. Tools of the Trade (up to a value of £1,350) are exempt from seizure from CRAR. Usually stock, vehicles and equipment are the items seized.

There are two different situations in this scenario, firstly where both CRAR and forfeiture are both being used for pure rent only, and secondly where CRAR is being used for rent, and forfeiture for service charges and insurance

1. Can agents take control of goods for RENT and then also forfeit for RENT in the same quarter?

The answer is no,  these are mutually exclusive means of recovery. However, if the enforcement agent has attended and finds the premises vacant, the CRAR process can be withdrawn forfeiture of the lease effected.

2. Can CRAR London take control of goods for rent, and forfeit for service charges or insurance in the same quarter?

The answer is yes, depending on the wording of the lease and only if done in the correct order. A landlord wanting to use both remedies must instruct agents to take control of goods  first, as there must be a lease in place for CRAR to be used.

If you are unsure as to where you stand regarding your commercial rent arrears in London contact us to get honest down to earth guidance as to where you stand.

Only goods owned by the tenant can be seized under CRAR. This excludes goods owned by a sub-tenant or other third-party. Tools of the Trade (up to a value of £1,350) are exempt from seizure from CRAR. Usually stock, vehicles and equipment are the items seized.

The enforcement process has three stages

1. Compliance stage – sending the 7 day enforcement notice– No Charge to clients
2. Enforcement stage – Taking Control of Goods – No Charge to clients
3. Sale (Disposal) stage – removing and selling goods

The threat of removal is often the landlord’s most effective weapon and  often results in payment. However it is worth considering the value that will be realised by a sale before a removal, as any shortfall  in costs is payable by the landlord.

There are two different scenarios here, firstly where both CRAR and forfeiture are both being used for rent the answer is No and secondly where CRAR is being used for rent and forfeiture for service charges and insurance the answer is YES.

1. Can we take control for RENT and forfeit for RENT in the same quarter?

No as these are mutually exclusive means of recovery. However, where the enforcement agent attends after the Notice of Enforcement has been sent and seven days have passed with no contact, and finds the premises vacant, we are then able to withdraw from action under CRAR, then proceed to forfeiture.

2. Can we take control for RENT, and Forfeit for Service Charges or Insurance in the same quarter?

Yes, depending on the provisions of the lease and again only if done in the correct sequence. A landlord wanting to use both remedies needs to take control first, as there must be an ongoing landlord/tenant relationship for CRAR to be used.

In circumstances where the tenant cannot or will not make payment, and the goods are of little value, making removal  of goods not viable, the landlord can proceed with forfeiture for unpaid service charges and/or insurance. It must be stressed that this action can only be taken if  the  terms of the lease permits.

This is dealt with in section 79 of the 2007 TCE Act. For the purpose of section 79, the lease ends when the tenant ceases to be entitled to possession of the premises under the lease, together with any continuation of it by operation of any enactment or of a rule of law. So if the tenant is holding over under the Landlord & Tenant Act 1954, the landlord can still exercise CRAR.

Otherwise CRAR ceases to be exercisable when the lease ends, subject to the exceptions set out in section 79 (4) which include the following:

(a) The lease did not end by forfeiture.

(b) Not more than 6 months has passed since the day when it ended.

(c) The rent was due from the person who was the tenant at the end of the lease.

(d) That person remains in possession of any part of the demised premises.

(e) Any new lease under which that person remains in possession is a lease of commercial premises.

(f) The person who was the landlord at the end of the lease remains entitled to the immediate reversion.