Commercial Rent Arrears Recovery (CRAR) is a process that was introduced on April 6th, 2014 to replace Distress for Rent. It means that landlords can recover rent without needing to go to court, (this can only be done by using certificated enforcement agents).
What is CRAR for?
CRAR is a procedure that only applies to rent and any VAT or interest due under the lease. As such, items that are not directly attributable to the possession and use of the premises by the tenant are not recoverable under this procedure. For the process of CRAR to be used, a written lease needs to be in place.
Moreover, for the CRAR procedure to be valid, a net unpaid rent needs to be calculated so that the landlord can claim arrears action. This means that as a landlord, you need to be able to calculate the rent due with utmost certainly, once VAT, interest, and any permitted deductions are made.
What is the minimum arrears period?
Before CRAR can be exercised, a minimum amount of arrears due must exist. This is known as “net unpaid rent” and is equivalent to a week’s rent (seven days). This is different from the old procedure, which allowed landlords to seize the assets of a tenant immediately upon falling behind with rent.
What can I recover with CRAR?
By employing the CRAR procedure, your chosen enforcement agents can recover only the principal rent due, as well as VAT and interest. You cannot use CRAR to recover insurance premiums, service charges, rates, or any other payments that are no direct rent. If you need to recover other charges not related to rent directly, you may need to look at alternative routes to do so, which include obtaining a court judgement and using the services of High Court Enforcement Officers.
If the rent is still not paid the enforcement agents can enter and take control of the tenant’s goods. At this point a Controlled Goods Agreement will be obtained to give the tenant a chance to agree to a payment plan. If an agreement cannot be reached, then the goods will be seized and sold at auction to pay off the debt. There are rules surrounding the goods that can be seized to repay the rent arrears. If the goods are used directly for trading, then they are exempt up to a value of £1,350, they must also belong to the tenant, they cannot be owned by a 3rd party.
What types of leases can I use CRAR for?
In order to apply the CRAR procedure, you need to have a current written lease in place, which needs to be solely for commercial use. You cannot use the CRAR procedure for properties with mixed use. For example, if the property in question is used partially as a dwelling, the procedure cannot be applied.
How much notice is needed?
You will need at least seven days’ prior notice, and these do not include Sundays or any Bank Holidays. You can also only exercise CRAR between 6 a.m. and 9 p.m. on working days.
Why use a law enforcement agency?
By using Able Investigations to recover rent under CRAR, you are sure every step is followed correctly, and you do not have to wait too much until you can recover rent due by seizing the assets of your tenant. We can also speed up the process and help you with the eviction of tenants as well if that is the case.
To instruct us or for help with any questions you may have about the CRAR process then please get in touched with our team by calling 0845 370 7401 or fill out our contact form.