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Commercial Rent Arrears Recovery (CRAR) & Forfeiture of Lease
Commercial tenant not paying their rent or breaching their contract?
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Has your commercial tenant breached their Contract?
Sеction 146 (S146) procееdings and thеn instruct us to еxеcutе thе Lеasе Forfеiturе.
Thе landlord typically holds thе right, as pеr thе tеnancy contract, to rе-еntеr and forfеit thе lеasе in casе of tеnant contract brеachеs.
Thе tеnant must first rеcеivе thе S146 documеnt, which outlinеs thе contract brеachеs, providing thеm with an opportunity to rеctify it by a spеcific datе. If thе brеach rеmains uncorrеctеd aftеr this datе, you can thеn instruct us to procееd with thе forfеiturе. Thе procеss for Lеasе Forfеiturе is outlinеd bеlow as Option 1.
If nеcеssary, wе can hеlp you draft thе S146 noticе and sеrvе it to thе tеnant.
Has your commercial tenant not paid their rent?
Without going through the Courts, here are the two popular opinions, your solicitor may have other options for you:
- Forfeiture of Lease: peaceably re-enter the premises without notice (known in legal terms as forfeiture). The tenancy contract normally gives the landlord the right to re-enter and forfeit the lease if rent payment is overdue by a specified period – often by 21 days (or the time period specified in the lease). Due to COVID the government have suspended forfeiture of lease for rent arrears from 26 March 2020 to 25 March 2022 (following the most recent extension).
- CRAR: Under Commercial Rent Arrears Recovery (CRAR) if the commercial rent is 7 days overdue you can instruct us to get your money back, by visiting the premises and remove goods to sell if they don’t pay. Due to COVID the government has put restrictions on enforcement on CRAR, the overdue rent needs to be 554 days or more in arrears to enforce under CRAR, this restriction is planned to be in effect until 25 March 2022. High Court Enforcement could be an option to consider through this time.
Their is a fee for this option, plus locksmith fee if needed.
We would send you an instruction document to complete. You email us the completed instruction form along with a copy of the rent contact for us to review. The premises needs to be 100% commercial, with no residential contracts and there can not be anyone in the premises at the time of the forfeiture.
We will send our Court Certificated Enforcement Agents to attend the property when it is closed and gain entry. The agent will then place the ‘Forfeiture Notices’ at all entrances to the property and at prominent places. The locksmith will change the locks. The agent will ensure the property is left secure.
If there are items of the previous tenant left in the property then for free we can put up ‘Tort Notices’, giving the owner time to arrange collection of the goods or they will be classified as abandoned and you the landlord can dispose of them.
This option is normally free to the landlord, as the tenant will be instructed to pay the enforcement fees with the unpaid rent.
The rent needs to be over 7 days in arrears, you will then be able to instruct us to get your unpaid rent. We will send you an instruction document to complete, this will be our warrant to enforce. You email us the complete instruction form along with a copy of the rent contract for us to review.
We will send a Notice of Enforcement letter to the tenant giving them 7 clear days to pay. If payment is not paid, we will send our Court Certificated Enforcement Agents to visit the premises and instruct the tenant to pay the rent.
If the tenant still refuses to pay or make an arrangement that you the landlord and the agent would be happy with, then the agents will look to take control/remove goods to sell and clear the debt.
There is another option if money is owed.....High Court Enforcement
Enforcing of the money owed for the rent with a High Court Writ
Whеn еnforcing unpaid rеnt undеr CRAR, agеnts arе limitеd to thе dеmisеd prеmisеs. With a High Court Writ of Control, our agеnts can go to any propеrty in England and Walеs whеrе thе dеbtor is to еnforcе thе dеbt.
Duе to COVID, landlords facе rеstrictions on еnforcing unpaid rеnt undеr CRAR. Rеnt must bе 554 days ovеrduе for еnforcеmеnt until March 25, 2022. You can apply for a County Court Ordеr, transfеr it to thе High Court, and sеnd our agеnts for еnforcеmеnt. Thе dеbtor and guarantors can bе namеd on thе court application.
Enforcеmеnt fееs arе usually covеrеd by thе dеbtor. You’ll nееd to pay court fееs, addеd to thе dеbt for collеction. It’s a viablе option whеn thе tеnant lеavеs thе propеrty. For morе dеtails, chеck our cliеnt flyеr, ‘Obtaining a CCJ and High Court Writ for unpaid moniеs. ‘ Wе’rе hеrе to assist еvеry stеp of thе way.
This is also a good option to landlords when the tenant is no longer at the rented property.
If you think this is the best process for you, see our client flyer called ‘Obtaining a CCJ and High Court Writ for unpaid monies’ for the full process. We can help every step of the way.
Our clients choose us for CRAR:
- Knowledge and experience – through over years of hands-on experience
- Swift – On Forfeiture of Lease we can dispatch agents same day
- Free Service – on Commercial Rent Arrears Recovery (CRAR)
- Dedicated Account Manager – we will keep you updated every step of the process
- Coverage– we have dedicated and highly skilled Court Certificated Enforcement Agents (Bailiffs) across the UK
- Partnerships– we have secured long-term solid relationships with high-profile Investigator and Security Companies within the UK
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How to use CRAR to quickly recover commercial rent. No need to go to court, and free*
In April 2014, something new and important happened in the world of commercial rentals: CRAR (Commercial Rent Arrears Recovery) came into play. Thanks to the Tribunals, Courts and Enforcement Act 2007, CRAR replaced the old way of handling overdue rent, known as ‘distress for rent’.
What does this mean for commercial landlords? Simply put, Section 72 of the Act gives you a straightforward tool. You can now use Schedule 12 to manage rent recovery directly from your tenants, bypassing the need for court proceedings. It’s a simpler, more direct approach to ensuring your rental agreements are respected.
As a general rule, only landlords of commercial premises, where the tenant remains in occupation of those premises, can use CRAR. There must also be a lease in writing. A contractual licence to occupy will not suffice.
A minimum sum equivalent to 7 days’ rent needs to be outstanding before any action can be taken, and notice of enforcement containing prescribed information must be given to the tenant at least 7 clear days before any goods are taken. It is possible to ask the court to reduce the notice period if there is a risk of tenants removing goods from premises (eg during an insolvency).
Other requirements of CRAR include:
- Details must be included in notice served on the tenant
- Notice must be served in a specific way
- Time limit for seizing goods from the notice being served (12 months)
- Goods can only be seized at certain times
- Only certain types of goods can be seized (and an inventory must be made)
- Goods seized must be valued and not be sold for at least 7 days
The service is not free as such, but the cost of using the service can be recovered from the debtor (tenant) if successful under The Taking Control of Goods (Fees) Regulations.
The statutory fees are charged to the landlord but recovered at the time of enforcing the warrant from the debtor.
We will commence action the same day we receive your instruction but the new regulations say we cannot take control of goods until after the Notice of Enforcement has expired. The notice can be issued the same day as the instruction.
- Is the property purely commercial not residential at all?
- Is the rent more than 7 days due? (See COVID CRAR extension)
- Is there an existing written lease or a written proof of tenancy at will?
- Is the tenant still in the property with goods worth more than the value of the arrears?
- Have you not yet issued other proceedings against this tenant?
Please note we can only collect pure rent arrears, any interest due under the lease, and vat.
We cannot collect by Commercial Rent Arrears Recovery (CRAR) – Insurance fees, Service charges or Rates. For these we have other alternatives to collect these debts
Let’s dive into some specifics about CRAR, shall we? First up, it’s important to note that CRAR is like a laser-focused tool – it zeroes in exclusively on recovering rent (plus any interest and VAT) as outlined in your lease agreement. What about other costs, like service charges? Well, those aren’t covered under CRAR. It’s all about keeping things straightforward and clear.
Another key point: a written lease is a must-have. Think of it as your roadmap for navigating CRAR. Any attempts to tweak or sidestep CRAR guidelines within your lease? They just won’t fly.
Now, about the rent due: it’s essential that this amount can be pinned down with certainty. And we’re talking about at least a week’s worth of overdue rent – that’s what constitutes the “net unpaid rent.” This net amount is what’s left after you’ve done the math with interest, VAT, and any allowed deductions. These could be things the tenant is entitled to knock off the bill if rent arrears come into play.
In a nutshell, CRAR keeps things neat and tidy – focusing only on rent and leases, making sure everyone’s on the same page. If you’ve got more questions, don’t hesitate to reach out. We’re here to help make sense of it all!
Here’s a little snippet about CRAR that’s super handy to know: it’s all about commercial properties. Picture this – you’ve got a pub with a cozy apartment upstairs. CRAR steps in for the commercial part (like the pub), especially if there’s a separate lease and entrance for the residential bit. Neat, right? This means you can use CRAR to handle any rent hiccups with the commercial lease without needing to knock on the court’s door.
But wait, there’s a twist! If your property is a blend of commercial and residential spaces under one lease, then it’s a different game. In this scenario, you’ll need to take a little trip to the court to sort out any rent arrears.
Keep this in mind, and managing your property with CRAR becomes a breeze. Got more questions? We’re just a message away to help clear things up!
Ready for a quick tip on using CRAR? It’s all about giving a heads-up! As a landlord, if you’re planning to use CRAR, remember to notify your tenant with a 7-day enforcement notice once their rent falls behind. It’s like saying, “Hey, just so you know, this is happening.” And yes, the rent needs to still be unpaid both when you send this notice and just before you might need to seize any goods.
But what about the tenant’s side of things? They’ve got options too. After receiving your notice, they can head to court to request a pause or a stop to the enforcement. How do you send this all-important notice? You’ve got choices: post, hand, fax, or even an email works.
And here’s a note on sub-tenants: if you want them to pay their rent directly to you, they’ll need a bit more notice – at least 14 days. It’s all about keeping everyone in the loop and making sure things go smoothly.
If you have more questions about CRAR notices, don’t hesitate to ask. We’re here to make the process as clear and stress-free as possible!
Let’s talk about how things work when it’s time to enforce CRAR. This part is about the ‘action’ phase – seizing goods to balance out those rent arrears. But, it’s not just anyone who can do this; only Certificated Enforcement Agents (the modern-day version of what used to be Certificated Bailiffs) are up to the task.
These agents can visit the property, using an open or unlocked door, or other usual entry methods, during sociable hours – between 6 AM and 9 PM, or within the tenant’s business hours if they’re different.
Now, here’s what they can seize: only the tenant’s goods on the leased property. And there’s a limit – the value of the goods shouldn’t exceed what’s owed in rent plus any extra costs. The tenant also gets a valuation of the items seized. If the tenant happens to be a sole trader, their work tools are safe up to £1,350.
If it comes to selling the seized goods, it happens publicly. The tenant gets a seven-day notice before the sale. It’s all about being fair and transparent.
Remember, this is a key part of CRAR and it’s important to get it right. Questions? Feel free to reach out. We’re here to help make sure you have all the information you need!
Now, let’s explore another path for commercial landlords – taking the High Court route. Alongside CRAR, you have the option to step into the court arena and obtain a judgment. This judgment can then be put into action by a High Court Enforcement Officer, wielding what’s known as a ‘writ of control’.
Sure, this court method might take a bit more time compared to CRAR, but in some situations, it’s just the ticket:
- Looking to recover more than just rent? Think service charges, insurance, and the like – the High Court route can help with these extras.
- If there’s a license in play rather than a standard landlord-tenant agreement, this is your go-to option.
- And what if your tenant has upped sticks and moved their business elsewhere? No problem. With a writ of control, the enforcement officer can visit the new location to take charge of the tenant’s goods. Remember, under CRAR, you’re limited to seizing goods only at the leased property.
Each scenario has its own best approach, and it’s great to have options. Got more questions about the High Court route? Drop us a line – we’re here to guide you through every step of the way!
Holding onto Your Goods: Once a notice of enforcement is in place, your goods become kind of like ‘tagged’ items. This means you can’t sell or take them off the property. But, don’t worry – they’re still yours.
Pausing the Action: Need a bit more time? You can apply to the court to delay (or ‘set aside’) the enforcement. It’s a handy option if you need to catch your breath and plan your next move.
Controlled Goods Agreement: This is a bit like a repayment plan. You agree to pay back what you owe over time, and while doing so, your goods stay with you. Just a heads up – if you miss a payment, the landlord’s enforcement agent might step in to remove them.
Inventory Check: If any goods are taken, the enforcement agent must give you a detailed inventory list, as per section 33 of the Taking Control of Goods Regulations 2013. It’s all about keeping things transparent.
Using CRAR Post-Lease: Your landlord can still use CRAR even if your lease has ended, but only under certain conditions – like the lease ending within the last six months, the lease didn’t end by forfeiture, and a few other specifics.
A Word on Insolvency: Struggling to pay commercial rent can be a red flag for insolvency. If that sounds like your situation, it’s a good idea to chat with a professional for insolvency or turnaround advice. They can help navigate these tricky waters.
Remember, understanding your rights is key in any CRAR situation. Got questions or need more clarity? We’re here to help – just reach out!