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Commercial tenants occasionally fall behind with their rent in a commercial lease. This leaves their landlord in a difficult situation and will often require them to take action to try to recover the rent arrears. If the landlord and tenant cannot agree on a plan, the landlord may take more formal action, such as court action or forfeiture. One option that may be available to them is the commercial rent arrears recovery process (CRAR) to recover commercial rent by seizing their tenant’s goods. If this is a landlord’s route, their commercial tenant has rights within the process. Both parties must understand what these are. This article will explain a commercial tenant’s rights under the UK’s commercial rent arrears recovery (CRAR) process.
What is CRAR?
Commercial rent arrears recovery (CRAR) is a legal process for a landlord with a commercial lease to recover rent arrears from their tenant. They do this by asking an enforcement agency to seize their tenant’s goods and sell them, using the proceeds to cover the rent arrears. For a commercial landlord to use the CRAR process, their lease agreement does not need to refer to the process. However, the tenant must have rent arrears, which are at least seven days’ rent.
There are rules about when a commercial landlord can use the CRAR process and further rules about how to use it. Additionally, commercial tenants have rights in the CRAR process, which we consider below.
Rights under CRAR
Whether you are a landlord or a tenant with a commercial lease, you must be aware of tenants’ rights when a landlord uses the CRAR process. We explain some of these here.
CRAR Procedure
If a commercial landlord chooses to use the CRAR process for their lease, it is unlawful for them to make any changes to the procedure in any way. This includes modifications and substitutions. If they do so and the process essentially is no longer the CRAR process, it could be unlawful and potentially criminal.
Enforcement Notice
An enforcement agent cannot remove a commercial tenant’s goods from their premises without previously giving the tenant an enforcement notice. The tenant must receive this at least seven days before the goods are due to be seized. Once a tenant receives the enforcement notice, they must be aware that it binds them to keep their goods on the business premises from that point onwards. Therefore, they cannot sell them.
A commercial tenant does have the right to delay the enforcement action once they receive this notice. They can do this by asking a court to either:
- grant a delay of execution; or
- set aside the enforcement notice.
Controlled Goods Agreement
Where a commercial tenant faces the CRAR process, they have the right to enter into a controlled goods agreement. This allows them to pay the rent arrears over a period of time. If they negotiate this, their goods must remain on their commercial premises.
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If the tenant defaults on the payments they agree to under a controlled goods agreement, the landlord’s enforcement agent has a right to seize the goods. However, the commercial tenant has the right to an inventory detailing what they take. This tenant’s right is in the Taking Control of Goods Regulations 2013.
Lease Expired
A commercial tenant has some rights regarding the CRAR process if their lease has expired. This is because a commercial landlord has restrictions on whether they can use the CRAR process in this situation.
They can only use the process if the following apply:
- there has not been more than six months since the lease expired;
- the landlord does not forfeit the commercial lease;
- when their lease expired, the rent was in arrears;
- the goods they had on the commercial premise are still, in part at least, in their possession as part of a commercial lease; and
- when the lease expired, their landlord could use the CRAR process.
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Key Takeaways
The CRAR process is a legal process a landlord can use to recover rent arrears from their tenant in a commercial lease. It allows them to instruct an enforcement agent to seize their tenant’s goods to receive the rent arrears. There are rules about how they do this and when it can apply. A commercial tenant has rights under the CRAR process, and this article has explained these.
For example, a commercial tenant must receive notice of enforcement at least seven days before their goods are seized. A commercial tenant also has the right to enter into a controlled goods agreement to arrange to pay off the rent arrear debt in instalments.
If you need help understanding what rights commercial tenants in the UK have under the commercial rent arrears process (CRAR) in the UK, LegalVision’s 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. So call us today on 0808 196 8584 or visit our membership page.
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