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What is the CRAR law? A quick guide for landlords

What is the CRAR law? A quick guide for landlords
What is the CRAR law? A quick guide for landlords

Landlords should take care to ensure that they understand how and when it is appropriate to implement CRAR. But what exactly is CRAR? Commercial rent arrears recovery (CRAR) is a valuable law that came into effect in April 2014. It enables commercial landlords to collect rent owned to them by taking goods from the property.

CRAR replaced the old common law ‘distress’; although it grants landlords similar rights, it has stricter regulations to protect tenants.

This legislation aims to ensure commercial landlords have the right to recover rental arrears, introducing a statutory procedure with a defined series of steps that landlords and their recovery agents must follow.

While CRAR is available to all commercial property lease agreements from April 2014 onward, including pre-existing rental agreements, there are various requirements, such as providing seven days notice before enforcement action begins.

Disclaimer: The information provided on clearway.co.uk is intended for general informational purposes only and should not be construed as advice or relied upon as a substitute for professional legal counsel on the subject of debt, lease or eviction-related matters. Any reliance you place on the information provided on clearway.co.uk is strictly at your own risk. We shall not be liable for any loss or damage, including without limitation, indirect or consequential loss or damage, arising from the use of, or reliance on, the information presented on this website.

Who can use CRAR?

It is important to clarify that CRAR procedures only apply to commercial landlords and where the tenant in default remains the occupant of the premise or has left within the last six months. Landlords must have a written lease, although this does not necessarily need to state that CRAR will apply in the event of rent non-payment.

CRAR can be used by:

  • Commercial landlords
  • Commercial agents
  • Property lawyers

CRAR can only be actioned when the tenant has missed rental payments equivalent to seven days – this is the minimum amount you can recover through CRAR. The tenant must then receive seven full days warning before an enforcement agent can remove their property.

In some scenarios, a landlord can apply for a court order permitting a reduced notice period if they believe there is a risk that the tenant will actively try to circumvent the CRAR process, such as removing goods from the premises or relocating items – this is particularly common when a tenant’s business is subject to insolvency proceedings.

Commercial Rent Arrears Recovery (CRAR) Service

What can CRAR be used for?

The two main instances when CRAR is useful are:

  • A commercial tenant has not paid rent.
  • A commercial tenant has been sub-leasing your property.

If the scenario involves a sub-tenant, the landlord can follow another slightly adjusted statutory process, giving the sub-tenant 14 days to bring rental arrears up to date via direct payment before seizing any goods.

Note that the only rental arrears that can be recouped through CRAR are defaults against the principal rent owed. Other late payments due to the landlord, such as insurance payments and service charges, cannot be recovered in this way. Instead, landlords can use other solutions such as SCAR – Service Charge Arrears Recovery.

Do you need to collect service charge rent arrears? Clearway offers landlords a tailored pre-legal recovery collection service, with all costs added to the debt. You can read more about our service charge rent arrears recovery process here. 

CRAR applies only to premises used entirely for commercial reasons and, therefore, is unsuitable for multi-use properties where one proportion of the building is a residential unit.

When can CRAR be applied?

  • The property must be used wholly for commercial use.
  • If the tenant was sub-leasing, CRAR can only be applied if it was a commercial lease.
  • A written lease must exist between the landlord and tenant, and this should outline that CRAR will take place if rent is not paid.

How to proceed with CRAR

Before you can begin CRAR proceedings, you must provide your enforcement agent with an authorisation called a Warrant of Control. This form allows the agent to complete CRAR processes on your behalf.

The notice served to the tenant must also meet mandatory requirements; working with an appropriately certified enforcement agent is essential. A legally valid notice should include all the necessary information and be delivered electronically, by post or in person.

After notice has been served, landlords and enforcement agents have a maximum of 12 months to seize goods. During the seizure, an inventory should be made detailing everything removed from the premises and ensuring that any goods taken are allowable.

Certified enforcement agents will only enter the property to seize goods during permitted times, usually during trading hours, and will ensure that each item within the inventory is properly valued.

Once the seven-day holding period has passed, and if the tenant has not taken steps to resolve the issue, the enforcement agent can proceed with arranging the sale of the items through a public auction.

  • Tenants must be given at least 7 days’ notice before enforcement agents arrive.
  • Only certified enforcement agencies can collect goods from the property.
  • After goods have been seized, tenants must be given another 7 days’ notice before the goods can be sold.

CRAR should be navigated with care, it’s important to seek the help and advice of an expert or legal professional before taking action.

what are rent arrears?

What Rights Do Commercial Tenants Have During CRAR Proceedings?

The restrictions and prescribed format of a CRAR process are there to protect commercial tenants – but equally, the tenant is obligated to conform to the instructions within a notice of enforcement. A tenant cannot remove or sell goods once they have been given formal notice.

However, tenants may be able to apply to the court for a postponement to CRAR called a delay of execution if there is an acceptable reason. Another potential outcome is that a tenant applies for a controlled goods agreement.

In this circumstance, the tenant agrees to make good on their debts and to make payments according to a schedule. The enforcement agent can remove the tenant’s goods if they default or fail to comply with the repayment terms.

Tenants must be given a copy of the inventories completed during the collection, detailing all items seized and other relevant details.

Other regulations state that tenants can only be subject to a CRAR process after a lease has ended if:

  • Their commercial lease ended within the previous six months for reasons other than lease forfeiture.
  • The tenant owed outstanding rent of at least seven days when the lease ended.
  • The tenant still has goods stored on the previously rented premise or still occupies the same property under a commercial lease agreement.

Business tenants that have fallen into rental arrears should also note that they are legally obliged to commence insolvency proceedings if they cannot pay debts due to a lack of liquidity – continuing trading when a director knows the company is insolvent may lead to fines, being struck off the director’s register, and being held personally liable for the company’s debts.

What Are the Advantages of CRAR for Commercial Landlords?

CRAR is a relatively fast and effective way for landlords to recoup unpaid rental payments from business tenants with limited costs. They can usually proceed with support from an authorised enforcement agent without needing to file claims or petitions with the court system.

However, there are caveats to be mindful of, and several circumstances when CRAR either will not apply or when it may not be the best resolution to claw back unpaid debts.

Landlords may find that proceeding with CRAR waives their right to enact a lease forfeiture situation when they wish to end a lease due to tenant non-compliance. An alternative process may be advisable if the tenant remains in situ and you want to evict them while recovering debts.

How Long Does it Take to Recover Commercial Tenant Defaults through CRAR?

On average over 60% of CRAR instructions into Clearway are successfully recovered within the first 7-days. The Compliance Stage before an Enforcement Agent (Bailiff) attends a property.

The enforcement stage also covers seven days, where the enforcement agent seizes goods equal to the rent owed and retains these for the minimum period. From there, the goods are normally sold via public auction, which may take two to six weeks, depending on availability and access to auctioneers within the local area.

Need CRAR services?

We provide a professional and experienced CRAR service to help you to secure outstanding rent arrears from your commercial clients.

We successfully collect thousands of pounds every month for landlords. Find out more about our CRAR service, or speak to one of our experts about starting the process today.

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