How will CRAR affect commercial landlords?

As of April 6th 2014, the process of using bailiffs to recover commercial rent arrears will change significantly; with the rules relating to distraint being replaced by the Commercial Rent Arrears Recovery (‘CRAR’) procedure under the Tribunals, Courts and Enforcement Act 2007 and the recently passed secondary legislation to enact (the Taking Control of Goods Regulations 2013).

Who can take control of goods under CRAR?

Under the CRAR ‘regime’, only an Enforcement Agent will be able to act to take control of goods to recover rent; an important adjustment from the distress procedure that allowed the landlord or his agent to distrain.

Notice period prior to taking control of goods

Under the Regulations, the Enforcement Agent will be required to provide seven clear (working) days notice prior to attending to take control of goods.

Minimum rent arrears period

Under the CRAR regime, the tenant will also need to be in arrears of at least seven days before the landlord can instruct an Enforcement Agent under the CRAR procedure. This is a significant departure from the distress for rent process, which permitted a landlord to attend for seizure immediately upon the rent falling into arrears.

Service charges, insurance and other miscellaneous charges

Another change to note is that under CRAR the landlord can only collect money owed for actual rent and not for other charges deemed as rent in the lease. Landlords may need to look at alternative routes to recover these charges, e.g. obtaining judgment and enforcing using High Court Enforcement Officers.

Permissible days and times for enforcement action

The existing distress for rent rules contained peculiar stipulations around times and days for levying distress (a bailiff could only act to distrain during daylight hours and not on Sundays). The new Regulations allow for enforcement to proceed on any day of the week between 6am – 9pm (or, where the normal operating hours of the business are not between 6am – 9pm, the normal operating hours of the business).

Type of lease required for CRAR to apply

For the CRAR procedure to be applied, there must be a current and written lease in place, and it has to be solely for commercial use (not “mixed-use” premises).

Seizing goods under CRAR

The definition of ‘tools of the trade’ has changed slightly. The new Regulations provide that ‘tools of the trade’ with a cumulative value in excess of £1,350 will be subject to seizure.

Notice requirements

In addition to the notice prior to taking control of goods, there are other (additional) notice requirements; 7 days notice must be provided before sale can commence (up from 5 days under the distraint process). The Enforcement Agent must also provide notice where he seeks to re-enter the premises having seized (but not removed) goods (i.e. on a ‘controlled goods agreement’ or, as it is currently known, a walking possession agreement).

It is worth noting that the notice periods can be dispensed with where the landlord or Enforcement Agent can satisfy the court that the goods are ‘at risk’ of being removed. It is not immediately clear what the procedure for this would look like or what evidence the court would be willing to accept.

Tenant’s right of appeal

Yes, the tenant can has the right to apply to court for an order that no further step may be taken under CRAR, without further order of the court, in relation to the rent claimed.

Can a landlord still use CRAR where the tenant is going into administration?

Because the timeframes under the new CRAR procedure are longer than under the rules of distress, there is an increased window of opportunity for tenants to enter administration (which may frustrate the landlord’s attempts to seize goods). It will still be possible however for a landlord to use the CRAR procedure where the court or the administrator grants permission to proceed.

Get help recovering your commercial rent arrears

As a nationwide provider of bailiff and High Court Enforcement services, Burlington are ideally placed to assist commercial landlords, their agents and solicitors to recover commercial rent arrears and action forfeiture instructions. For more information on the services we can provide, please contact our Client Services Team on 0330 900 8000.