Commercial Rent Arrears Recovery

Caragh Bailey
03/06/2021
5 min read
Commercial Rent Arrears Recovery explained by Parachute Law. A shop front on a red brick street displays a 'to let' sign.

What can I do if my commercial tenant is not paying rent?

If a tenant is not paying rent the landlord may be able to recover the arrears by way of a statutory procedure called Commercial rent arrears recovery (CRAR), if the following apply:
  • The property is solely commercial (not residential)
  • The rent is more than 7 days due
  • There is an existing written lease or a written proof of tenancy at will
  • The tenant is still in the property, which holds goods worth more than the value of the arrears
  • The landlord has not yet issued other proceedings against the tenant

If any of the above are false, the case will likely have to go to court.

What is commercial rent arrears recovery?

Commercial rent arrears recovery allows landlords to recover rent arrears by seizing commercial tenant's goods and selling them, without going to court.

How do I recover my rent arrears?

As long as your case meets the criteria at the top of this page, you can contact a Certificated Enforcement Agent (a type of Bailiff) to execute a warrant on your behalf.

You will need to fill out a warrant of control form with the Agent, who must provide 7 days notice of enforcement.

Commercial Rent Arrears Recovery & The Pandemic

Rent arrears accrued during the 'protected period' cannot be pursued in the usual way and may qualify for relief.

The Commercial Rent (Coronavirus) Act is explained in more detail below.

What are CRAR proceedings?

The Agent takes over the process and if the rent remains unpaid at the time of enforcement, they may enter by an open or unlocked door only and seize certain goods sold on the premises to be sold at auction.

What are my rights as a tenant under CRAR?

If you are unable to pay your rent you may be at risk of insolvency. You should seek advice from an insolvency or turnaround firm as soon as possible.

    1
    You cannot sell or remove goods from the property, once a notice of enforcement has been issued.
    2
    If you wish to delay enforcement, to allow you time to pay the arrears, you can apply to court for a delay of execution or a set aside.
    3
    You may be able to enter into a controlled goods agreement, to repay what you owe over time. The goods remain on the premises, but your landlord's Agent will remove them if you do not keep up with your agreed repayments.
    4
    When goods are taken, the agent must provide you with a full inventory of everything they have seized.

Frequently Asked Questions

Rent arrears arising from the Government Enforced Closure of the business during the pandemic are protected.

If rent arrears accrued during the protected period, either the landlord or tenant can apply for relief under the Act. Relief may be:
  • Full or partial write off;
  • Deferral of the debt on terms for up to 24 months; or
  • Reducing or writing off interest on the debt.

The protected period began 21 March 2020 and ends on different dates in England & Wales and according to the business' sector:
Sector
England
Wales
Hospitality and Nightclubs
July 18, 2021
August 7, 2021
Non-essential Retail
April 12, 2021
August 7, 2021
Garden Centres
May 13, 2020
March 22, 2021
Personal Care
July 18, 2021
April 12, 2021
Hairdressers
July 18, 2021
March 15, 2021
Hotels & B&Bs
July 18, 2021
May 17, 2021
Self-contained Tourist Accommodation
April 12, 2021
March 27, 2021
Indoor Leisure
July 18, 2021
May 3, 2021
Outdoor Sports/Leisure
March 29, 2021
April 26, 2021
Theatres & Cinemas
July 18, 2021
May 17, 2021
Large Events Venues
July 18, 2021
August 7, 2021

Applications for relief must be made before the 23rd of September 2022. However, this may be subject to change.

If the rent is not protected, the landlord can use CRAR as normal, they may also be able to forfeit a lease or issue winding up petitions
Your landlord can only use CRAR on an expired lease if:
  • It ended less than 6 months ago
  • It did not end by forfeiture
  • You owed the rent when the lease ended
  • You still possess all or some of the goods formerly located at the premises
  • You occupy the goods under a commercial lease
  • The landlord was entitled to immediate reversion at the time the lease ended
In certain circumstances, when a tenant has breached a covenant of the the tenancy agreement, the landlord has the right to forfeit the lease.

You should always speak with a solicitor first to find out whether the right to forfeit has arisen according to the law, as wrongful forfeiture can give rise to a counter claim from the tenant, costing you damages, business disruption and legal costs, as well as embarrassment and loss of reputation.

If the right to forfeit has arisen you may be able to re-take possession immediately by having an Agent 'peaceably re-enter' the property, or, you may be required to give a period of notice by issuing a Section 146 Notice.
Alternatively, you could issue court proceedings after the notice has been served, or immediately in cases of non-payment of rent.

A section 146 notice must be served in accordance with the specific notice provisions contained within the lease and specify:
    1
    Details of the breach
    2
    Sum of compensation due for tenant to pay
    3
    How to remedy the breach within a reasonable timescale (if breach can be remedied)

If the tenant fails to pay the compensation and remedy the breach within a reasonable time, then the landlord can aim to forfeit the lease, either by peacable re-entry or by issuing court proceedings, unless the right to forfeit has been lost.

The right to forfeit can be lost by taking steps that recognise the continued existence of the lease, such as demanding rent which is due after the covenant has been breached in a 'once and for all' event (although, the right would not be lost if the breach was ongoing).

Forfeiture may also be restricted if the tenant becomes insolvent.

It is advisable to instruct a solicitor to handle all or some of the process, to protect yourself from committing an unlawful forfeiture. We can help with:
  • Review lease
  • Confirm if right to forfeit has risen
  • Prepare & Serve Section 146
  • Arrange for Agents to peaceably re-enter
  • Issue court proceedings
  • Arrange for possession order enforcement, once obtained
Yes. The landlord can issue a claim in the small claims court to obtain a County Court Judgement for the outstanding arrears.

 
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