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What’s CRAR anyway? some basic understanding on Commercial Rent Arears Recovery

commercial rent arrears recovery

The temporary new measures in the current pandemic situation, and some changes are now being made to the use of Commercial Rent Arrears Recovery (CRAR) regime too.

Q: What’s CRAR anyway?

The CRAR regime came into force in 2014 to recover rent in relation to commercial premises. It replaced the old common law right to levy distress. The regime is regulated, and it requires the use of enforcements agent(s). It is a self-help remedy for a landlord to take control of goods at the premises or to collect rent up to the value of the arears.

A landlord can exercise CRAR when the rent remains unpaid – such unpaid rent being above the minimum of 90 days’ rent during the “relevant period” (currently until 30 June 2020). After the relevant period, this specified unpaid rent might revert back to the traditional 7 days’. We need to keep an eye on the forth-coming changes.

Q: Can CRAR be applied to residential or mixed-use premises?

 No. CRAR can only be used to recover rent for commercial lease premises. The lease must be evidenced in writing.

Q: What rent?

The rent applicable for the CRAR regime is the principal rent payable under a lease for possession and use of the premises (together with VAT and any interest payable on that rent). It does not include any sum in respect of rates, council tax, services, repairs, maintenance, or insurance, even though they might be defined as “rent” in the lease.

Q: What should a landlord bear in mind in contemplating exercising CRAR?

 If a landlord considers that CRAR is the only way to recover the unpaid rent, then he or she should first consider:-

  • what other ways there may be to collect rents – if any; and
  • whether he/she wishes to forfeit the lease (or to terminate by mutual agreement – if so, agree the terms of surrender by way of a deed); and

In exercising CRAR, the landlord will be waiving right to forfeit the lease.

Prior to exercising CRAR the sum of net rent unpaid immediately before seizing any goods should be ascertained. The net rent unpaid must be above the minimum amount specified under the current legislation (used to be 7 days’ unpaid rent, but it is now 90 days’ unpaid rent under the present new regulations).

CRAR must be exercised by an enforcement agent who is authorised by a landlord in writing.

Q: What should a tenant do on receipt of notice of CRAR?

Under the present situation, this should not be anyone’s immediate concerns! But…

If you do receive any notice, then check what it says first, and all information is correct. The notice of CRAR enforcement must include the tenant’s name and address, the date of the notice, the details of the arrears rent, how and when (times and dates) the payment of the debt may be made, and the contact details of the enforcement agent.

The notice binds the property in the tenant’s goods to the enforcement agent. The enforcement agent may enter (and re-enter) the premises to take control of goods which belong to the tenant and which are either on the premises (or on a highway).

Q: What happens if the enforcement agent is wrong?

There are various rules that the enforcement agent must comply with in dealing with CRAR. If an enforcement agent commits some kind of breach of the rules, the tenant may apply to court for an order for the return of the goods or for damages in respect of the loss suffered as a result of the breach. It is also important to note that it is an offence punishable by a fine and/or imprisonment, if a person intentionally obstructs an enforcement agent or interferes with controlled goods without excuse.

At Cognitive Law we would be very happy to assist you on your commercial property issues. Please feel free to drop me a line at mayumi.hawkes@cognitivelaw.co.uk

Mayumi Hawkes