Commercial Rent Arrears and Lease Forfeiture: Understanding Your Options
When a commercial tenant stops paying rent or breaches the terms of their lease, landlords may have several options available. The appropriate course of action will depend on the lease, the nature of the breach and what the landlord ultimately wants to achieve.
Â
Two commonly considered remedies are Commercial Rent Arrears Recovery (CRAR), where the objective is to recover qualifying commercial rent while the lease continues, and forfeiture of lease, where the landlord may wish to bring the lease to an end and recover possession of the commercial premises.
Â
Absolute Enforcement assists commercial landlords across England and Wales with CRAR, peaceable re-entry for forfeiture of commercial leases and more complex enforcement situations. This guide explains the key differences and some of the important issues landlords should consider before deciding how to proceed.
Commercial Rent Arrears Recovery (CRAR): Recovering Unpaid Commercial Rent
Late or unpaid commercial rent can quickly affect cash flow and increase a landlord’s financial exposure. Where the statutory requirements are satisfied, Commercial Rent Arrears Recovery (CRAR) provides landlords with a direct enforcement route to recover qualifying commercial rent without first obtaining a court judgment.
When you instruct Absolute Enforcement, an authorised enforcement agent progresses the case through the statutory Taking Control of Goods procedure, beginning with the compliance stage and issue of a Notice of Enforcement. If the full amount due remains unpaid, enforcement can progress and an enforcement agent may attend the commercial premises to take control of qualifying goods.
CRAR can be particularly effective where the landlord wants to recover qualifying rent while allowing the commercial lease to continue. However, if forfeiture is also being considered, landlords should decide their preferred outcome before taking action, as exercising CRAR may affect an existing right to forfeit for the same arrears.
Why Landlords Use CRAR
No court judgment required: Where CRAR is available, qualifying commercial rent can be pursued without first obtaining a court judgment.
Direct enforcement route: The case progresses through a regulated enforcement process using authorised enforcement agents.
Opportunity for early payment: The Notice of Enforcement provides an opportunity for the tenant to pay before an enforcement visit becomes necessary.
Enforcement costs: Statutory enforcement fees are generally recoverable from the tenant. Absolute Enforcement charges an engagement fee when instructed which, where permitted by the lease, may also be recoverable from the tenant.
Forfeiture of Lease: Regaining Control of Commercial Property
Where a commercial tenant has failed to pay rent or breached other terms of the lease, forfeiture may allow the landlord to terminate the lease and recover possession, provided the lease contains an appropriate right of re-entry or forfeiture and the legal requirements are satisfied.
Forfeiture is fundamentally different from CRAR. CRAR is generally used where the landlord wants to recover qualifying rent and continue the lease. Forfeiture is considered where the landlord wants to bring the lease to an end and recover possession.
For non-payment of rent, peaceable re-entry may be available in appropriate circumstances. For other breaches of covenant, additional legal requirements can apply, including the potential requirement for a notice under section 146 of the Law of Property Act 1925. The lease and circumstances should therefore be reviewed before action is taken.
Landlords should also be careful not to take action that could waive an existing right to forfeit, and tenants may have the ability to apply to the court for relief from forfeiture.
Case Study: The Cost of Delaying Action
A landlord approached Absolute Enforcement after spending several months attempting to resolve ongoing problems with a commercial tenant. Rent arrears had continued to increase and concerns had developed regarding breaches of the lease and the condition of the property.
After receiving instructions and reviewing the operational circumstances, our team attended the premises, completed the instructed forfeiture and secured the property.
The case demonstrates why landlords should consider their options early. Where a tenancy is no longer commercially viable, continued delay can result in increasing arrears and further exposure.
Why Landlords Consider Forfeiture
Recover possession: Bring the commercial lease to an end where the legal right to forfeit has arisen.
Limit further exposure: Prevent arrears or other lease problems from continuing indefinitely.
Secure the premises: Regain control and secure the commercial property.
Move forward: Once possession has been recovered, the landlord can consider reletting or alternative use of the premises.
Absolute Enforcement can manage the operational forfeiture process, including attendance by enforcement agents, locksmith arrangements, securing the premises and displaying the appropriate notices. Where goods are left behind, we can also assist with the operational requirements surrounding Torts (Interference with Goods) Act notices where instructed.
Most straightforward commercial forfeitures can be completed during the initial attendance. Complex or operational forfeitures are assessed individually so that the appropriate resources can be deployed to give the operation the best opportunity of a successful and safe outcome.
Complex Commercial Property Enforcement
Not every commercial property case fits neatly into a standard CRAR or forfeiture instruction. Some properties involve occupants, significant quantities of goods, security risks, livestock, suspected unlawful activity or other circumstances requiring a more detailed operational plan.
Absolute Enforcement has experience coordinating complex commercial enforcement operations, bringing together enforcement agents and, where required, locksmiths, security personnel, dog units and other specialist resources.
Where legal issues fall outside our role as enforcement professionals, we can work alongside the landlord’s solicitor and other relevant professionals to ensure that the enforcement operation follows the appropriate instructions.
Examples of Complex Cases
Goods, machinery or equipment left at commercial premises: Cases may require additional planning around securing the property, controlled access and dealing appropriately with goods remaining on site.
Livestock on commercial land: Horses or other animals require additional welfare, safety and operational considerations.
Suspected unlawful activity: Higher-risk cases may require additional security planning and liaison with the client’s solicitor or police where appropriate.
Unauthorised occupants or access: Additional resources may be required to secure and maintain control of a commercial property.
Protests or large-scale disruption: Operational planning, additional security and controlled access may be required where there is an increased risk of confrontation or disruption.
If your case is unusual or you believe additional resources may be required, contact our team before instructing so we can discuss the circumstances and plan the operation appropriately.
Why Choose Absolute Enforcement?
Absolute Enforcement works with commercial landlords, managing agents, property professionals and solicitors throughout England and Wales, providing enforcement solutions ranging from straightforward commercial rent arrears recovery to complex property operations.
Our services include Commercial Rent Arrears Recovery (CRAR), Forfeiture of Lease, High Court enforcement, tracing and specialist commercial enforcement operations.
Our enforcement work has also featured on Channel 5’s Call the Bailiffs: Time to Pay Up, giving viewers an insight into the work carried out by professional enforcement agents.
We aim to make the instruction process straightforward, explain the likely costs before deployment and ensure that the resources used are appropriate for the circumstances of the case.
Not Sure Whether You Need CRAR or Forfeiture?
Do you want to recover the rent and keep the commercial lease in place, or do you want to recover possession of the property?
If you want to recover qualifying commercial rent while retaining the tenant, CRAR may be the appropriate route.
If you want to end the commercial lease and recover possession, forfeiture may be available depending on the lease and circumstances.
If the position is more complicated, speak to Absolute Enforcement before taking action. We can review the operational circumstances and help establish which of our enforcement services may be suitable for the case.
Frequently Asked Questions
Yes. Where the statutory requirements for CRAR are satisfied, a commercial landlord may be able to recover qualifying rent arrears without first obtaining a court judgment.
This depends largely on the outcome you want. CRAR is generally appropriate where you want to recover qualifying rent while continuing the lease. Forfeiture may be appropriate where you want to terminate the lease and recover possession. Taking one form of action can affect another, so the intended outcome should be considered before enforcement begins.
Potentially, yes. The lease must contain an appropriate right of re-entry or forfeiture and the relevant legal requirements must be satisfied. The lease and circumstances should be reviewed before action is taken.
Some cases require more than a standard CRAR or forfeiture attendance. Absolute Enforcement can assess the operational circumstances and, where appropriate, coordinate enforcement agents, locksmiths, security personnel and other specialist resources.
