We have been busy the last few weeks with instructions to enforce under CRAR - commercial rent arrears recovery - as tenants miss rent payments due at the end of the quarter.
Whilst some commercial leases require monthly rent payments, most are quarterly, either the last day of the quarter or the traditional quarter days (25th March, 24th June, 29th September and 25th December).
Regardless of the payment schedule, CRAR may be used to recover the rent arrears providing the following conditions are met:
- There is a written lease in place
- The rent is 7 days or more overdue and the sum owed is for the value of at least 7 days’ rent
- The premises are purely for commercial use (if the premises are mixed use, you will need to obtain a County Court judgment)
Under CRAR, only rent, interest and VAT may be recovered. Service and any other charges may not be recovered using CRAR. If other charges are significant, you might want to consider obtaining a county court judgment for all the arrears.
To use CRAR, the landlord, or their agent, must instruct a certificated enforcement agent, such as The Sheriffs Office where all our enforcement agents are certificated. The landlord is not permitted to enforce himself.
The tenant must be given seven clear days’ notice of enforcement. This will give them the opportunity to pay the arrears in full or apply to court for a set aside or delay of execution.
If they do not pay within that timeframe, then the next step is for the certificated enforcement agent to attend the premises to take control of goods belonging to the tenant, up to the value of the debt owing including costs.
The attendance can take place between 06:00 and 21:00, 7 days a week, or the tenant’s normal business hours if those are different.
The tenant may offer to pay off the arrears in installments. If the landlord agrees to this, the tenant will sign a controlled goods agreement, which means that those goods may not be removed or sold and that the enforcement agent may return at any point to remove them for sale if the tenant defaults on any payments.
Sale of goods
If the controlled goods are subsequently sold to satisfy the debt, this will normally by auction. The tenant must be given seven clear days’ notice of the sale.
If the tenant has sub tenants, the landlord can tell them to pay him directly, rather than paying the tenant. However, the landlord must give the sub tenants at least 14 days’ notice.
Tools of the trade and exempt goods
Some goods will be exempt from seizure by the enforcement agent, including perishable goods.
If the tenant is a sole trader and they are the only one to use tools and equipment to carry out their trade, these “tools of the trade” will be exempt from seizure up to the value of £1,350. Tools of the trade beyond that value may be taken into control by the enforcement agent.
If you would like to learn more about CRAR, please download our complimentary eBook guide.