Forfeiture of lease vs CRAR – Which should I carry out?

On 6 April 2014, the Taking Control of Goods Regulations was introduced, and many landlords have been wondering whether this legislation affects their rights to forfeit a lease. This piece of legislation introduced the Commercial Rent Arrears Recovery (CRAR), which allows commercial landlords to take control of goods that belong to the tenant and sell them at auction in order to recover outstanding rent.

Even though forfeiture was not affected by this legislation, you may need to consider your exact situation before deciding whether to apply forfeiture of lease or CRAR as a commercial landlord.

What is Forfeiture of Lease?

Just like it did before 2014, forfeiture of lease offers landlords of commercial premises the possibility to terminate a lease before the original end date because of a breach by the tenant. One of the most common reasons that may force commercial landlords to carry out forfeiture of lease is non-payment of rent. All leases will normally stipulate the number of days the rent needs to be overdue before forfeiting the lease. This is typically between 14 and 21 days.

In order to obtain possession after forfeiting the lease, the landlord needs to instruct an enforcement agent to attend to change the locks and take possession of the premises.

What is CRAR?

If a commercial landlord simply wants to recover the rent they are owed, they may take control of the goods that belong to their tenant and sell them at auction to recover any money owed. A court order is not required for CRAR, but some conditions need to be met for the CRAR to be legally enforced.

To proceed with CRAR, the law requires there to be a written lease in place (that has not ended), and that the commercial landlord is only seeking to recover outstanding rent, nothing else. This type of procedure cannot be used for mixed use premises i.e. part commercial, part residential, and the rent needs to be at least seven days overdue. A commercial landlord needs to give the tenants seven days’ notice of their intention to exercise CRAR and CRAR can only be enforced by a certificated enforcement agent. Once the seven day notice period has passed, enforcement agents will attend to seize goods, with a total value not exceeding the rent owed, from the debtors. Then if a payment is not forthcoming, either in full or by payment plan, the goods can be sold at auction to compensate for the rent owed.

Which option is better?

Of course, a landlord needs to think carefully about the route they want to go because they cannot employ both forfeiture of lease and CRAR at the same time. CRAR cannot be used for those situations where the lease has already been terminated. If the landlord’s main concern is to recover possession of the property, forfeiture of release will be the best option, as he or she then can pursue the former tenant for outstanding rent arrears. However, if the landlord decides that the chances of getting any money owed there from the tenant are unlikely, CRAR may provide them with a quick solution for recovering at least some of the money owed.

Able Investigations is a UK-wide enforcement agency that can help you recover rent arrears from tenants after they have left the property, or offer you solutions for taking control of goods belonging to your tenants for unpaid rent. No matter which solution you opt for, get in touch with us for more information and advice. Call our team on 0845 370 7401 or fill out our contact form and we will get back to you as soon as we can.

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