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A commercial lease agreement will detail several rights and obligations, including the lease term, rent amount and repair responsibilities. Unfortunately, a tenant may experience financial difficulties and consequently fall into rent arrears. Where this occurs, a landlord can recover the rent through the commercial rent arrears recovery (CRAR) process. This article will explain how to initiate the commercial rent arrears recovery (CRAR) process.
This cheat sheet outlines what you should be aware of in your lease agreement.
Commercial Rent Arrears Recovery
The commercial rent arrears recovery (CRAR) process is a legal procedure for a landlord to recover rent arrears for a commercial lease. It allows them to recover the rent by engaging an enforcement agent to seize the commercial tenant’s property and sell it to raise money for the rent.
A landlord can only recover overdue rent that is at least seven days overdue, and they must know the exact amount of arrears.
There are specific rules to properly initiate the CRAR process. We examine these below.
Who Can Initiate CRAR?
The CRAR process is only available for landlords to recover missing rent for their commercial property. In addition, it is specifically only for where a written lease details the occupancy of the commercial tenant. Therefore, where there is a licence for occupation, a landlord cannot rely on the CRAR process.
A landlord with a commercial lease can only use the CRAR process if their tenant still occupies the property. If they are not in occupation as their commercial premises, the CRAR process is not lawful. Although a commercial landlord may be able to carry out the CRAR process, it is illegal for them to carry out the actual seizure of goods. Instead, an enforcement agent must do this.
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Procedure for CRAR
There is a specific procedure to properly initiate the CRAR process. As a landlord, you cannot change the procedure or you risk breaching anti-avoidance provisions. Likewise, you only initiate the CRAR process by finding an authorised enforcement agent. The agent will then undergo the rest of the process on your behalf. This is important, as you cannot simply enter your tenant’s property and seize their goods.
1. Find an Authorised Agent
The first stage in the CRAR process is to find an authorised enforcement agent to carry out the process for you. Once you are happy with the agent, you complete a Warrant of Control form, which gives the agent the legal right to carry out the rest of the CRAR process for you.
2. Serve Notice
Next, your chosen enforcement agent will serve your commercial tenant with a seven-day notice. This is the compliance stage. The notice will detail the amount of arrears and inform your tenant that they have seven days to pay it.
3. Enter Property
The authorised enforcement agent will enter your property where your commercial tenant does not pay the rent arrears after the seven days are up. This is the enforcement stage. The authorised enforcement agent will enter the commercial premises and seize your tenant’s goods. They can do this even if the property is locked.
Notably, your enforcement agent does not have to start the enforcement stage exactly after seven days. Instead, they can do it anytime up to 12 months. In some circumstances, the court can extend this timeframe.
4. Auction Goods
The final stage in the CRAR procedure is the disposal stage. This is where the enforcement agent will use the goods they seize to raise money for the unpaid rent. They will usually do this at a public auction.
The money raised will go towards missing rent owed to you and fees of the enforcement agent. Where there are any funds left, these will go to your tenant.
Key Takeaways
The commercial rent arrears recovery process (CRAR) is a legal procedure a landlord can initiate when their tenant owes them rent. Only a landlord with a commercial lease can initiate CRAR, and rent must be at least seven days overdue. The first step is for a landlord to choose an authorised enforcement agent. The agent will then serve the tenant with a seven-day notice with details of arrears and ask that they pay by the end of the seven days. Where they do not, the enforcement agent can enter their commercial premises and seize goods. They will then sell these to raise money for the rent areas.
If you need help initiating the CRAR process, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
The CRAR process is a legal procedure for a landlord to be able to recover rent arrears from their tenant.
The final part of the CRAR process is for the authorised enforcement agent to sell the tenant’s goods to raise money for the rent arrears.
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