If you are a commercial landlord, you are sure to find commercial rent arrears highly stressful. Chasing payments can be time consuming, stressful and costly, especially if you are relying on the income to pay for bills and fund property maintenance. Thankfully, there is a clear commercial rent arrears recovery (CRAR) process you can follow.
What is the Commercial Rent Arrears Recovery (CRAR) Process
As a commercial landlord, you have privileges that other creditors don’t have. This is the case even under new bailiff regulations. You are able to utilise certified enforcement agents to execute warrants for commercial rent arrears on your behalf, without having to navigate the lengthy court process.
Commercial Rent Arrears Recovery Rules
There are a handful of commercial property debt recovery rules to be aware of before you start the CRAR process. For example, the property must be solely used commercially, and not as a residential building. The rent must be more than seven days late, and there must be an existing written lease or proof of tenancy. It’s also important that the tenant has goods in the property worth more than the value of arrears, and that you have not yet issued other proceedings against them.
CRAR and Distress
Back in 2014, Distress was replaced with CRAR, and this is now the process everyone has to follow for claiming commercial property debts. It involves issuing a notice of enforcement before attending the property – this must be done by a bailiff and cannot be done by a landlord – which gives the tenant seven days notice before any action is taken, and binds their goods. The notice also details your intention to take control of their goods to repay what’s owed.
CRAR is a good way to protect you and your tenant’s best interests. By exercising CRAR against your commercial tenant, it’s possible to take control of their goods via a Controlled Goods Agreement. This guarantees that no other bailiffs or enforcement officers can remove any goods until your debt has been paid, and ensures that your debt is first in line to be settled. It also gives the tenant some breathing space, giving them the time to see if they can pay the debt.
Subtenants in Commercial Properties
If there is a subtenant in a commercial property, the debt recovery process can become slightly more complex. Under the Tribunals Court and Enforcement Act, only the tenant’s belongings can be taken control of, and nothing relating to the subtenant should be factored in. It’s also important to avoid taking payments from a subtenant, as this could look like a contract between you and the subtenant has been created.
Instead, a notice under Section 81 (2) of the Tribunals, Courts and Enforcement Act 2007 should be issued. This will detail the amount of rent that is owed to the landlord, all of which can be recovered after a grace period of 14 days. As a landlord, you have the right to recover any rent payable by the subtenant after this. If the subtenant doesn’t pay, the CRAR process can begin in the same way it would for the original tenant.