Edwin Coe Blog – Commercial Rent Arrears Recovery (CRAR)

Following a prolonged consultation, the law on distress for rent will be abolished and the Commercial Rent Arrears Recovery (CRAR) will come into force on 6 April 2014 under the implementation of Part 3 of the Tribunals Courts and Enforcement Act.

CRAR will allow a landlord of commercial premises to enter and seize goods subject to conditions.  CRAR will also allow a mortgagee to do the same in certain circumstances.

Points to note

1. CRAR can only be used for “pure” commercial rent arrears (principal rent, VAT and interest).  It cannot be used for sums normally reserved as rent such as service charge and insurance.
2. The lease must be evidenced in writing.
3. There must be at least 7 days rent arrears.
4. It can only be used in commercial premises, so it cannot be used in mixed-use premises.
5. A landlord must first serve an enforcement notice giving at least 7 days’ notice, using an “enforcement agent”.
6. Following expiry of the notice agents can enter and remove goods between 6am and 9pm on any day of the week.  Goods may also be recovered from the highway, for example by wheel clamping a vehicle on the highway.
7. Agents can enter the premises without warrant and have a general power to use reasonable force, but this does not extend to force against persons.
8. As before, the landlord cannot seize tools of the trade, but there is now a restriction of a value of up to £1,350.  The landlord also cannot seize tools of the trade if seizing them is likely to result in breach of the peace.
9. Walking possession is replaced by Controlled Goods Agreements (CGA).  Two clear days’ notice must be given before the enforcement agent re-enters the property.
10. There is a minimum period of 7 days between the removal of goods and sale.  The maximum period for taking control of the goods is 12 months.
11. CRAR will cease to be exercisable when the lease expires unless goods were taken control of before the end of the lease or the lease was not ended by forfeiture, not more than 6 months has passed since the end of the lease, rent is still due and the person remains in possession of any part of the premises as a commercial tenant, and the landlord retains its interest in the property.
12. A superior landlord can serve notice on a sub-tenant.

These changes will make life more difficult for landlords because they will give the tenants an opportunity to remove goods prior to them being seized and to enter insolvency prior to the date of entry.

For information regarding Edwin Coe and the Property and Construction group please visit http://www.edwincoe.com/services/property.asp

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