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Commercial Rent Arrears Recovery (CRAR)
The Tribunals, Courts and Enforcement Act 2007 has now taken effect (from April 2014), replacing the distress for rent with CRAR – Commercial Rent Arrears Recovery.
The introduction of CRAR means that a commercial landlord can take control of goods as part of the TCE Act in order to recover rent payable under the lease from the tenant, without needing to go to court. There are a number of changes which have come into effect with CRAR:
- Only for rent and only with a lease – CRAR only applies to the rent (and any interest and VAT) payable under the lease so items not directly attributable to the tenant’s possession and use of the premises, such as services charges, are not recoverable through CRAR. A written lease must also be in place and any contract or lease that seeks to amend or avoid the CRAR provisions is now void.It should be possible to calculate the rent due with certainty and the arrears must be for at least seven days’ of rent (this is 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. CRAR may not be used by the landlord if the lease covers mixed use of commercial and residential areas of the property. If the premises are mixed use, the landlord must 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 tenant – If a landlord wishes to use CRAR, he will have to give a tenant 7 days’ notice of enforcement after the rent becomes overdue and rent must still be unpaid at the time the notice is served, as well as immediately before any goods are seized. After notice has been served, the tenant may then apply to court for a set aside or delay of execution.The notice can be served either by post, hand, fax or email. The landlord can tell sub tenants to pay him their rent directly, but is required to give them at least 14 days’ notice.
- Enforcement, seizure and sale – Under CRAR, only 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 these are different.Only goods belonging to the tenant on the property covered by the lease may be seized. The Certificated Bailiff may not take control of goods with a value greater than the rent owing plus the costs and he must provide the tenant with a valuation of the items seized. Tools of the trade used by sole traders are 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.
These changes are expected to change the way in which a landlord may recover unpaid rent or other sums owed, as they give tenants much more notice of a landlords’ intentions.
At Royds, our experts can advise on all areas relating to property litigation, including the new CRAR procedures and their implications for landlords.
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