Even though most commercial leases end as they should, there are times when things don't go according to plan and you may need to regain control of your property.
If tenants fail to pay their rent, commercial landlords are often faced with the question of applying CRAR or forfeiture when it comes to regaining control of their property. There are multiple options available for landlords whose tenants are in rent arrears, and they both come with advantages and disadvantages.
Some of the options include issuing court proceedings against the tenants to recover debt, forfeiture, entering into a payment agreement, or applying CRAR. Here we will be looking at the pros and cons of two of the most common proceedings, namely CRAR and forfeiture.
What Is Forfeiture?
Forfeiture requires ending the lease with the tenant. It typically involves entering the commercial premises and changing the locks after rent has been unpaid for specific length of time, depending on the contract. While it allows you to regain control of your property, forfeiture is not a suitable choice if you want to recover the outstanding rent. If you forfeit the lease, you cannot seize the tenants' belongings that they left in the property to use them to pay off the debt.
Forfeiting the lease does come with several benefits. For example, if there is little value in the goods the tenant stores within the property, then having the unit itself may be more valuable to them, which means that this may encourage them to pay any arrears.
Following forfeiture, the tenant can make an application to court for relief from forfeiture
What is CRAR?
CRAR gives commercial landlords a chance to recover monies owed by allowing them to seize the goods stored in the property and use them for settling the debt.
To start CRAR procedures, the amount of rent owed must be more than seven days, and there must be evidence of an existing lease. Moreover, the property needs to be purely commercial without any residential areas (for example, a pub with living quarters upstairs).
What are the stages of CRAR?
CRAR has three stages, which means it will take longer to regain control of the property than using forfeiture. The compliance stage offers that tenant a seven-day enforcement notice, to allow them to pay any arrears. If CRAR fails to pay within the seven-day period, the next stage is the enforcement one, which means taking control of goods equivalent to the rent owed. Finally, the disposal stage refers to removing and selling the goods if the tenant still fails to pay. The goods are then typically sold at a public auction.
Which method is best?
It is worth noting that if a Certificated Enforcement Officer enters the property on your behalf during the CRAR procedure, and you discover there are no goods belonging to the tenant that can be seized, you will have to then cancel the instruction of CRAR. CRAR and forfeiture cannot be employed at the same time. Once CRAR has been cancelled, you will have to wait a set amount of time before you can forfeit the lease.
So which method you choose to regain control of your commercial premises will rely on whether you expect to recover the rent arrears. If you don’t think you can recover this, it may be quicker to forfeit the lease from the beginning.
Able Enforcements are a UK-wide enforcement agency and have considerable experience in dealing with both lease forfeiture and CRAR. Get in touch with us if you have any questions or wish to talk through your own situation. Call our team on 0345 366 0000 or fill out our contact form and we will get back to you as soon as we can.
