Commercial Rent Arrears Recovery

A new remedy became available to Landlords of Commercial Leases on the 6th April 2014 who were seeking to recover rent arrears. The remedy is known as ‘Commercial Rent Arrears Recovery’ (CRAR) and replaced the previous system of ‘distress’ with a more restrictive, court-based approach to rent recovery.

The old system of ‘distress’ allowed a Landlord to take control of the tenant’s goods and sell them on to recover the amount of the rent arrears. The Landlord was under no obligation to provide a notice period to the tenant, and the definition of ‘rent’ was particularly wide to include the market rent, as well as additional service charges, insurance, repair and maintenance costs.

The new system of CRAR has reformed the previous system with a series of additional limitations on the Landlord. Under CRAR, the landlord must serve an enforcement notice on the tenant for a minimum notice period of seven clear days, and must also authorise an enforcement agent in writing to carry out the CRAR on their behalf before goods can first be seized. In addition, the definition of rent under CRAR has been narrowed to exclude any additional charges except for the pure income rent plus VAT.

In order for the CRAR to be exercised, a number of conditions must also first be met. Firstly, the tenant must be in arrears of rent before the enforcement notice is served. Secondly, the amount of the rent arrears must be capable of being calculated with certainty. Moreover, the amount of unpaid rent must be equal to or exceed a prescribed amount; currently equal to seven days’ rent. Should these requirements be met, the landlord may serve an enforcement notice allowing an enforcement agent to subsequently take control of the goods.

Once the goods have been seized, the tenant must be given at least seven clear days’ notice of sale by the landlord, in order to get the opportunity to repay the amount owed. The notice will specify the time and place of sale, though the goods must be sold by public auction unless a court orders otherwise.

It is important that Landlords and Tenants of a Commercial Lease are aware of the strict requirements set out for Commercial Rent Arrears Recovery, as a breach can allow the tenant to bring a claim against the Landlord. In such a scenario, the court can either return the goods to the tenant or award damages for loss suffered by the tenant as a result of non compliance. For this reason, should you either need to serve a CRAR notice, or receive one, it is advisable that professional legal advice is sought at the earliest opportunity to advise you of your rights.

At Seatons, our team of highly trained commercial lawyers have a wealth of experience in rent recovery and provide clear, easy to understand legal advice at low, sensible fees. For more information, give us a call on 01536 276300.