CRARing back the rent...
The commercial rent arrears recovery (CRAR) procedure is now a year old and we’re looking at how things have changed for landlords trying to find alternatives to forfeiting their tenant’s lease.
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DISTRESS (the old way) |
CRAR |
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Lease. Requires a relationship of landlord and tenant to exist. There is no need for a written lease. |
Lease. There must be a written lease. |
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Rent. Any sum payable under the lease that is reserved as rent. |
Rent. The principal rent only and any VAT and interest on it. Minimum amount of a sum equivalent to seven days' rent must be outstanding. |
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Premises. Distress can be exercised at mixed use premises. |
Premises. CRAR can only be exercised at premises that have a commercial use. It cannot be exercised at mixed use premises, unless the residential use is in breach of the lease. |
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Person exercising. Distress must be exercised by a certificated bailiff. There is no requirement for the instruction of the bailiff to be in writing, although this is commonly done. |
Person exercising. CRAR must be exercised by an enforcement agent. Authorisation must be in writing. |
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Notice. No requirement for notice to be served prior to entry. |
Notice. Notice of enforcement must be given seven clear days prior to exercise. |
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Time of entry. Entry to the premises may be gained between sunrise and sunset on any days of the week other than Sunday. |
Time of entry. Between 6 am and 9 pm on any day of the week, and during the tenant's business hours if they are outside of these prescribed hours. |
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Sale. Goods may be sold after five days. There is no required method of sale. |
Sale. Goods must be sold at a public auction or such other means of sale ordered by the court, after giving the tenant at least seven clear days' notice. |
The greatest change is that CRAR, unlike the old rules of distress, requires a landlord to give at least 7 days’ notice to a tenant so the tenant can take legal advice but this clearly raises the risk that the tenant will take that opportunity to remove valuable items from the property. A landlord can apply to the court to give shorter notice if he or she believes it is ‘likely’ that goods will be removed but there is no doubt that the whole process has been slowed down and a tenant of a commercial property has more rights than they had before. Other options for recovering rent have become more attractive to landlords as a result of the changes and seizing goods is not always the best solution. As the new rules are significantly more restrictive than the old, it is essential to take advice early.
If you think your tenant might be in financial difficulties then call us on 0116 212 1000 and we will be happy to take you through your options.
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