We have had a number of enquiries from clients asking whether the introduction of CRAR on 6th April 2014 affects the landlord’s right to forfeit the lease and the simple answer is no.
Forfeiture was not affected by the introduction of The Taking Control of Goods Regulations 2014. It remains a Common Law right for landlords of commercial premises and permits them to terminate the lease before the contract end date because of a breach by the tenant.
The most common reason for forfeiture is non-payment of rent and the lease will normally stipulate the number of days the rent must be overdue before the landlord can forfeit the lease, often 21 days.
The landlord can instruct an Enforcement Agent, for example The Sheriffs Office, who will attend to change the locks and take possession of the premises, so they can be re-let to a new tenant.
A court order is not required and notice does not need to be given.
CRAR – Commercial Rent Arrears Recovery – allows landlords of commercial property to take control of (seize) goods belonging to the tenant to sell at auction to pay rent arrears. A court order is not required.
CRAR replaces the previous Common Law remedy of distress or distraint for rent. However, there are some key differences.
- There must be a written lease in place
- Only rent may be recovered, nothing else
- CRAR may not be used for mixed use premises
- The rent must be at least 7 days overdue
- 7 days’ notice of the landlord’s intention to exercise CRAR must be served
- CRAR may only be enforced by a Certificated Enforcement Agent
You can read more about the differences in this article.
Combining forfeiture and CRAR
This can still be done using CRAR, however, notice will have to be served under CRAR before action on that front can be taken.
With the requirement for the rent to be 7 days’ in arrears, plus 7 days’ notice (which excludes Sundays and bank holidays), it will be at least 15 days from the rent due date before the landlord can take action under CRAR.
However, having served notice, once the Certificated Enforcement Agent attends to take control of goods under CRAR, the landlord can also instruct him to forfeit the lease either the following day or at a later date.
CRAR cannot be used if the lease has already been terminated.
Alternatively, the landlord can choose to forfeit the lease straight away, if his main concern is to recover possession of the property, then he can pursue the now former tenant for the rent arrears, as well as any other outstanding payments such as service charges and insurance, through the courts by obtaining a County Court judgment and transferring it to the High Court for enforcement by a High Court Enforcement Officer (HCEO).
David is the former CEO of The Sheriffs Office.