Commercial Rent Arrears Recovery

As a commercial landlord, it can be frustrating when rent goes unpaid, particularly in challenging economic times. Commercial rent arrears recovery involves the processes and legal mechanisms landlords can employ to recover unpaid rent from commercial tenants.

Expert Commercial Law has a panel of solicitors who can help landlords recover arrears from tenants of commercial properties.

Commercial Rent Arrears Recovery (CRAR)

The primary legislation governing the recovery of commercial rent arrears in England and Wales is the Commercial Rent Arrears Recovery (CRAR) procedure. This was introduced by the Tribunals, Courts and Enforcement Act 2007. It came into force in April 2014. CRAR replaced the ancient common law right of distress, modernising and streamlining the process whilst ensuring fairness and transparency.

Under CRAR, landlords can seize and sell a tenant’s goods to recover unpaid rent. However, CRAR only applies for pure rent arrears. It can not be used for other sums such as service charges or insurance contributions.

Additionally, CRAR can only be used if there is a written commercial lease. The amount owed must also be at least seven days’ rent.

Procedure for CRAR

Serve a Notice of Enforcement:

Before taking any action, the landlord must serve a Notice of Enforcement on the tenant. This notice must be given at least seven clear days before enforcement agents can visit the premises to seize goods.

Instruction of Enforcement Agents:

Once the notice period has expired, the landlord can instruct certified enforcement agents to recover the arrears. These agents are authorised to enter the tenant’s premises, seize goods, and sell them to cover the rent arrears and associated costs.

Entry to Premises:

Enforcement agents can only enter the premises at reasonable times, typically between 6 am and 9 pm, or during the tenant’s business hours. They must enter peaceably and cannot use force to gain entry.

Seizure of Goods:

The agents will list and take control of the tenant’s goods, which can then be sold to recover the debt. Certain goods are exempt from seizure, such as items necessary for the tenant’s trade or profession, up to a value of £1,350, and personal items like clothing and bedding.

Sale of Goods:

After taking control of the goods, the enforcement agents must wait at least seven days before selling them, providing the tenant with a final opportunity to settle the arrears. The proceeds from the sale are used to cover the arrears, enforcement costs, and any surplus returned to the tenant.

Tenant protections

While CRAR provides landlords with a powerful tool for recovering rent arrears, it also includes several protections for tenants:

Notice Requirements:

The requirement for a seven-day notice period ensures tenants have advance warning of enforcement actions and an opportunity to address the arrears.

Exempt Goods:

Certain essential goods are protected from seizure, ensuring that tenants can continue their business operations.

Proportionality:

Enforcement agents must act proportionally, seizing only the goods necessary to cover the arrears and associated costs.

Alternative remedies for commercial rent arrears recovery

In addition to CRAR, landlords have other options for recovering commercial rent arrears:

Forfeiture:

Landlords can forfeit the lease, effectively ending the tenancy and taking back possession of the property. This remedy is available if there is a forfeiture clause in the lease and the tenant is in breach of their obligations, including non-payment of rent.

Forfeiture is a drastic measure and should be considered carefully, as it can result in loss of income and the need to find new tenants.

Debt Claims:

Landlords can pursue a debt claim through the courts to recover unpaid rent. This involves issuing a formal demand for payment and, if necessary, initiating legal proceedings.

Although potentially time-consuming and costly, a successful debt claim can result in a court order for payment. This can then be enforced through various means, including garnishing the tenant’s bank accounts or obtaining a charging order against their assets.

Negotiation and Mediation:

In many cases, negotiating with the tenant can be an effective way to recover rent arrears. Landlords and tenants can agree on a payment plan or other arrangements to address the arrears without resorting to legal action. Mediation services can also help facilitate discussions and reach a mutually acceptable resolution.

Implications for landlords and tenants

Understanding the procedures and implications of commercial rent arrears recovery is crucial for both landlords and tenants:

• For Landlords: Using CRAR and other remedies requires careful consideration and adherence to legal procedures. Missteps can lead to legal challenges and potential liabilities. Landlords should also weigh the long-term relationship with their tenants and the potential impact on their business operations.
• For Tenants: Awareness of their rights and protections under CRAR is essential. Tenants should respond promptly to notices of enforcement and seek legal advice if necessary. Engaging in open communication with landlords can often lead to more favourable outcomes.

How can Expert Commercial Law assist?

The solicitors on our panel provide expert legal advice on commercial landlord and tenant disputes. They can also assist potential defendants in their cases if a claim is brought against them.

Our panel firms provide expert legal advice and can help protect their clients’ rights and interests. They can also help evaluate the strength of the case and advise on the best course of action. If you need help with a dispute surrounding land or property ownership, then please get in touch with us today. Our panel firms have extensive experience in land and property disputes.

Our solicitors also help with commercial claims, such as partnership disputes, fraud claims and CCJ removal.

Unfortunately, we cannot assist with housing disrepair cases.

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