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Commercial Rent Arrears Recovery

With the introduction of the Tribunals, Courts and Enforcement Act 2007 in April 2014, distress for rent was replaced by CRAR – commercial rent arrears recovery.

Section 73(8) allows a commercial landlord to use Schedule 12 (taking control of goods) of the Tribunals, Courts and Enforcement Act 2007 Act to recover rent payable under the lease from the tenant, without needing to go to court.

CRAR usage, notice and laws.

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, arenot 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.

Only for commercial premises
CRAR may only be used for commercial premises. If the lease covers mixed use of commercial and residential areas of the property, CRAR may not be used by the landlord. If the premises are mixed use, the landlord will need to obtain a judgment to recover the arrears. A court order is not required to exercise the right to use CRAR for commercial premises.
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.

Enforcement, seizure and sale

Under CRAR, only 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.

Recovery of Service Charge & Insurance Arrears

Non CRAR – Service Charge & Insurance Arrears

With the restrictions on the ability to recover anything other than pure rent, this has left many landlords unable to effectively recover any other amounts due under the terms of the lease, including service charge and insurance arrears.

Where this situation arises, in addition to providing enforcement services for CRAR, Court Enforcement Services Limited are able to assist landlords in the collection of all sums due under the lease, by way of our Pre-Legal Recovery Process.

This process is undertaken as free service to our clients, and will be delivered by designing a bespoke process flow to suit our client’s requirements. This process will encompass the initial contact with the tenants through to enforcement, by permissible means for the debt type.

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Working in partnership with our Clients we offer a wide range of services that ultimately maximise the prospect of effective recovery. We are dedicated to supporting our Clients and our hands on service and clear approach aide accurate provision for recovery of funds.

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