If you are a commercial landlord who is struggling with tenants who have not paid their rent, then you are likely to be looking at the steps you need to take to recover monies owed to you. Using the CRAR (Commercial Rent Arrears Recovery) process to retrieve outstanding rent means that you don’t have to go to court.
Using CRAR to retrieve rent
CRAR replaced the landlords’ right of distress in April 2014, and is the procedure that landlords must follow to retrieve outstanding rent from their commercial tenants. A court order is not required when using CRAR procedures, but Certificated enforcement agent must be used throughout the process.
What debt does CRAR cover?
Landlords can only use CRAR to recover rent arrears. Those needing to recover additional fees, including insurances, service charges, and other rates that the tenant usually pays, then a landlord will need a County Court Judgement.
When can you begin CRAR proceedings?
CRAR can only be implemented when the money owed is more than the value of 7 days rent and if there is a written lease in place. Upon instructing a Certificated enforcement agent, the process can begin immediately with a letter being sent to the tenant that gives 7 clear days of notice that an enforcement agent will be entering the property. If payment is not made within these 7 days of notice, an enforcement officer will be able to visit the property to seize goods, which can then be sold at auction if payment is not agreed.
In the complex arena of managing commercial properties, a pressing question often arises for landlords facing the issue of unpaid rent: Do they need to resort to court proceedings to retrieve rent arrears?
The introduction of the Commercial Rent Arrears Recovery (CRAR) process in April 2014 has provided a clear and streamlined answer, allowing landlords to recover outstanding rent without the need for a court order.
This blog post delves into the CRAR process, including its significance, the roles involved, and how it fits within the broader spectrum of legal options available to landlords, including statutory demands, winding-up petitions, and possession orders.
The Essence of CRAR
CRAR stands for Commercial Rent Arrears Recovery. It is a procedure that enables landlords of commercial properties to recover rent arrears directly from tenants without having to initiate court proceedings. This process is not only efficient but also cost-effective, providing a straightforward path to reclaim unpaid rent.
How CRAR Works
CRAR can be implemented when there is a written lease agreement between the landlord and the commercial tenant, and the amount owed is more than the value of 7 days' rent.
The process begins with the landlord serving a notice to the tenant, giving them 7 clear days to pay the outstanding rent. This notice must be served properly to ensure the process adheres to legal standards and offers the tenant a fair opportunity to settle their debt.
If the tenant fails to pay within this period, a Certificated enforcement agent can then enter the commercial premises to seize goods equivalent to the value of the owed rent.
The Role of the Enforcement Agent
A crucial component of the CRAR process is the Certificated enforcement agent. These agents are authorised to carry out the seizure of goods from the tenant’s property.
Their involvement ensures that the process is conducted with professionalism and in compliance with legal requirements. The agent's role is pivotal in minimising disputes and facilitating a fair resolution.
Limitations of CRAR
While CRAR is a powerful tool for recovering rent arrears, it does have its limitations. It applies solely to the recovery of rent arrears and cannot be used to reclaim additional charges such as insurance, service charges, or other non-rent-related fees.
For these other charges, landlords may need to pursue a County Court Judgment (CCJ).
Beyond CRAR: Other Legal Avenues
Should the CRAR process prove inadequate or if there are additional fees to be recovered beyond rent arrears, landlords have several other legal avenues at their disposal:
- Statutory Demands: This can serve as a precursor to a winding-up petition. It requires the tenant to pay the debt within 21 days or face possible insolvency proceedings.
- Winding-Up Petitions: If a statutory demand is not satisfied, a landlord might consider a winding-up petition to recover significant sums of money.
- Possession Orders: In cases where landlords wish to regain possession of their property, applying for a possession order through the High Court is an option, though it is a more complex route that requires careful legal consideration.
The Importance of Legal Advice
Navigating the legal landscape of commercial rent arrears recovery underscores the importance of seeking professional legal advice.
This ensures that landlords choose the most appropriate and effective strategy for their situation, adhering to legal requirements and minimising potential conflicts.
Conclusion
To answer the initial question, commercial landlords do not necessarily have to go to court to retrieve rent arrears, thanks to the CRAR process.
This procedure offers a direct, legally sanctioned pathway to recover unpaid rent from commercial tenants, bypassing the need for court proceedings.
However, it's crucial for landlords to understand the limitations and conditions under which CRAR can be used, as well as the other legal options available for recovering different types of debts.
By leveraging CRAR and understanding the broader legal context, landlords can effectively manage their properties and ensure financial stability without the immediate recourse to litigation.
Able Investigations can help commercial landlords with their commercial rent arrears recovery process as Certificated enforcement agents. If you require assistance with recovering outstanding rent on your commercial premises, then speak to a member of our team on 0345 366 0000, or email enquiries@ableinvestigations.com.
