Commercial Rent Arrears Recovery Service (CRAR)

Is CRAR appropriate for my case?

CRAR is only available under the terms of a written commercial lease. This means that it is not possible to use CRAR if any residential premises are included in the lease (which is sometimes the case with pubs, or premises which combine a shop and a flat). This is one reason why you should ensure that, if you are renting out a combination of commercial and residential properties, you do so under separate leases.

Making use of CRAR means that you waive your write to forfeiture of the lease.  In some circumstances, forfeiture may be a better course of action if there are other existing breaches of the terms of the lease.

Only basic rent, amounting to at least seven days’ unpaid rent, can be recovered under the CRAR provisions.  Even if other payments are reserved as rent under the terms of the lease (for example, rates, service charges, insurance, repair and maintenance costs), they will not be considered as “rent” for the purposes of CRAR, and will, therefore, be excluded from your claim. If these additional charges are included in an inclusive rent clause, only that amount of the rent which is “reasonably attributable” to the tenant’s possession and use of the premises will be included in any CRAR claim.

There are restrictions on the property that can be seized.  Only property owned by the tenant can be subject to the CRAR process, and only goods up to the value of the debt. Any property which is for the debtor’s personal or professional use, up to the value of £1,350, cannot be seized.

You must give the tenant at least seven days’ notice, in writing, before entering the premises.  This is important, as it does give your tenant the chance to remove their property from the premises, thereby putting it out of the reach of the enforcement agent. If you have any concerns that your tenant may attempt to do this, make sure you speak to your dedicated solicitor for expert advice.

You must also give at least seven days’ notice ahead of any sale of the property secured by the enforcement agent.  It is possible to arrange for an earlier sale, in circumstances when waiting seven days would substantially reduce the value of the property, or would render it unsalable.

You must use an enforcement agent to take control of the tenant’s assets.   This needs to be authorised by you in writing. The enforcement agent can then, after the required notice period has elapsed, enter the premises to either take control of the property and physically secure it at the premises or take the property to a different location. Where this is not possible, we can advise you on the terms of a controlled goods agreement, under which the tenant agrees not to remove or dispose of the goods before the rent arrears is settled.

The enforcement agent is entitled to recover its costs.  If the recovery of the property took place with a high court writ, the enforcement agent can charge a percentage fee of any amount over £1,000 (the percentage fee applies to anything over £1,500 if the recovery happens without a high court writ). Below this amount, the enforcement agent will charge a fixed fee.

You can require any sub-tenant to pay rent directly to you to recover any arrears. The process is still to CRAR, but fourteen days’ notice is required, as opposed to seven.