If you are a landlord renting out commercial properties, you need to know the ins and outs of CRAR. This is the Commercial Rent Arrears Recovery Procedure (CRAR for short) that came into force in 2014, and stipulates how landlords must proceed in order to recover unpaid rent. If you are unsure of any aspect of the procedure or need to brush up on the new legislation, this guide will explain the current CRAR procedures for landlords.
What is CRAR?
CRAR outlines the legal process that must be followed when commercial tenants fall into rent arrears. It applies to commercial tenants only, and does not apply to properties that are used as a dwelling.
The eviction of commercial tenants, or the recovery of their rent, can be achieved through what is known as commercial rent arrears recovery (abbreviated to CRAR) via a certified bailiff. However, there are certain legal restrictions that were put in place in 2014 as part of the Tribunals, Courts and Enforcement Act 2007, which dictate how this must be done. We’ll outline these below.
Before April 2014, landlords were able to recover any rent they were owed by employing bailiffs to enter the property without notice. The bailiffs were entitled to surprise tenants by turning up unannounced, and seize items to the value of the outstanding rent, thereby ensuring that the landlord received the rent they were owed. This was known as distress or distraint.
After April 2014, however, tenants have been endowed with a number of new legal rights, meaning that landlords are no longer entitled to exercise distress.
How does CRAR differ from the right of distress?
CRAR in effect gives extra protection to commercial tenants, restricting the actions that landlords can take to recover their rent. The new rules stipulate that:
- Tenants must be given 7 days’ notice of the intent to enter their premises and recover property. This excludes Sundays and bank holidays.
- Bailiffs cannot be employed until the rent is 7 days in arrears.
- Under CRAR, only rent arrears and the relevant VAT and interest can be recovered. Landlords are not entitled to recover other outstanding debts such as service charges.
- Landlords must give tenants 7 days’ notice before selling on the goods that they have seized.
- Tenants have the right to appeal the CRAR process, putting it on hold until a court order can be obtained to continue with the rent arrears procedure.
CRAR services from David Charles
Rent arrears recovery is a complex and delicate process which needs to be carried out to the letter of the law. Many landlords prefer to outsource any CRAR operations that may arise as part of a package of commercial property management services. This can ensure peace of mind that legal procedures are being properly followed, and fits in seamlessly with a range of other related duties including rent collection, service charge administration, liaison with tenants and recruitment of new tenants.