There are a lot of costs to keep on top of as a business owner, including paying rent. Falling behind can be hugely stressful, especially if you’re unsure of the steps your landlord can take. In this blog, we have taken a look at commercial property debt recovery and the commercial rent arrears recovery process.
How Does Commercial Property Debt Recovery Work?
If you’re unable to pay your rent, landlords can instruct a bailiff to take action. This is known as Commercial Rent Arrears Recovery (CRAR) and it’s a process landlords can use if you fall behind with rent payments. Your landlord can only start the process once you own the equivalent of at least seven days’ worth of rent. The CRAR process can only be used if there is a written lease in place, and if none of the premises are used for residential purposes.
Bailiffs Removing Goods for Your Business
CRAR involves a bailiff visiting the business premises with the aim of removing goods to cover the cost of the unpaid rent. They can do this by removing goods and selling them at auction, locking them away so you cannot use them, or by letting you make agreed payments in order to keep your goods. If there are no goods to take, or not enough goods to cover the debt, they may return at a later date. They have 12 months to do so, starting from the date of the enforcement notice.
Bailiffs must enter peacefully between 6am and 9pm, and outside of these hours if your business operates them. They can only enter during a door or loading bay, and not via windows or any other method. Bailiffs can also remove vehicles if it’s parked on your driveway or on a public road, but not if it’s parked on a third party premises. For example, if it’s parked in a private car park.
Before bailiffs can remove your goods, they have to give you seven days’ notice. They don’t have to give you the chance to pay the debt instead but many landlords do, as it generally means the debt is paid quicker.
Landlord Forfeiture of Your Lease
If you are in arrears with your rent, your landlord could take steps to repossess the property. Whether or not your landlord can take forfeiture action and under what circumstances should be detailed in your lease. Usually, forfeiture requires a written notice under section 146 of the Law of Property Act 1925, but this notice is not required for unpaid rent. Your landlord can forfeit the lease by taking physical possession of the property, and they can do so through peacefully entering or by court action. You might be able to apply to the court for ‘relief from forfeiture,’ which allows you to stay if you meet certain conditions.
If your lease does not end early and you can’t terminate it, you may owe rent until the lease ends, even if you stop trading as a business. After your business has stopped trading, rent owed can be treated as a ‘non-priority’ debt, but business rates remain a ‘priority’ debt.
Taking Court Action to Recover Commercial Rent Arrears
When it comes to commercial property debt recovery, a lot of landlords choose to recover the funds via the County Court. This recovers the rent arrears, without having to repossess the property. The County Court will issue a County Court Judgement (CCJ) which is reflected on your credit report. They will take your circumstances, income and outgoings into account, before detailing in the CCJ how the debt should be repaid.
If you keep on top of the payments, your landlord can’t take any more action against you. If you miss payments, they can take further action, such as taking money from your wages to repay the debt or by freezing money in your bank account.
Commercial Property Debt Recovery at Cobra Financial
One of the most effective ways of recovering commercial debts is by enlisting a debt collection agency, and this route avoids a lengthy court process. At Cobra Financial, we work on behalf of landlords to recover unpaid rent. Using our extensive knowledge of commercial property debt recovery, we negotiate between landlords and tenants to find a solution. Get in touch to find out more.
