Commercial Rent Arrears Recovery (CRAR) – 2022 Expert Guide
13th September 2022
Are you a commercial landlord that is looking to enforce Commercial Rent Arrears Recovery (CRAR) on a tenant that has failed to keep up with the rent? Direct Collection Bailiff Ltd.’s high court enforcement specialists have produced this helpful guide to assist with CRAR enforcement and an update to the Commercial Rent (Coronavirus) Bill, ensuring the rent that is owed to you is paid back.
Commercial Rent Arrears Recovery (CRAR) Expert Guide – Contents
- What is Commercial Rent Arrears Recovery (CRAR)?
- What Is the Commercial Rent (Coronavirus) Bill?
- I Want to Enforce CRAR Proceedings – What Is the Process?
- Why Choose DCBL for Commercial Rent Arrears Recovery?
In recent years, it has become more popular for businesses to rent commercial properties rather than buy them outright.
There are several reasons why business owners may choose to rent a property rather than buy it, and there are also many benefits to doing so.
Smaller businesses, for example, may choose this option as they may not be able to accurately predict their future income. Not being tied to a building can be of benefit if financial difficulties arise and the business needs to stop renting.
The landlords themselves will also benefit from this as well, as they will have a regular income stream of rent.
There are, however, times when the tenant may fail to pay rent for one reason or another which can become problematic for the landlord.
Unpaid rent is unfortunately very common, with landlords needing a dedicated solution to help recover this.
To highlight the severity of this, the British Property Federation (BPF) estimated that back in June 2021, £7.5 billion of commercial rent were in arrears.
In most cases, the rent not being paid on time may be for a genuine reason which can be resolved relatively quickly and amicably.
When situations arise where the tenant straight-up refuses to pay the rent owed, further escalation is needed in the form of Commercial Rent Arrears Recovery proceedings.
What is Commercial Rent Arrears Recovery (CRAR)?
Commercial Rent Arrears Recovery (CRAR) allows landlords of commercial premises to collect rent arrears by problematic tenants by taking control of goods and then selling them.
In 1977, the Rent Act stripped residential landlords the ability to recover unpaid rent through the control of goods however, this did not affect those with commercial properties.
Although, the goods cannot be recovered by the landlords themselves as this has to be done by professional and certified enforcement agents such as (DCBL).
The CRAR process itself allows landlords to recover the overdue rent without the need for a court order. There is a limitation to this however, as this only applies to commercial tenancies subject to a Written Lease.
What is a Written Lease?
When a commercial property is rented by a business, it is common for a written lease (or agreement) to be created.
The lease is a contract between the landlord and the tenant, and outlines the rights that both parties have. Most written leases are made up of express terms (what was agreed) and implied terms (rights given by law).
In the interest of commercial rent, this may be related to you (the landlord) having the right to occupy the premises should rent not be paid by the tenant.
What Is the Commercial Rent (Coronavirus) Bill?
The Commercial Rent (Coronavirus) bill was announced in November 2021, following the requirement for non-essential businesses to close during lockdowns.
It was put in place for commercial premises tenants to offer additional protection against enforcement action.
The bill was also introduced to encourage a resolution of outstanding debts during the pandemic.
A new arbitration process is being proposed for rent debt claims issued from 10th November 2021. Following this, the Government is ring-fencing debt accrued during COVID.
Landlords and creditors are expected to negotiate and reach an appropriate resolution with their tenants.
The arbitration rule should result in the tenant paying off their arrears alongside usual commercial rent payments.
The Government estimated that 15,500 businesses would be able to use this arbitration process.
Commercial Rent (Coronavirus) Bill Update
On 24 March 2022, the bill was set to be passed into law with the arbitration system being introduced.
The key items stated in this Bill include:
- Either the landlord or the tenant can initiate the arbitration.
- The tenancy must be a commercial or business tenancy.
- The reference for arbitration must be made within 6 months of the day the bill is passed.
- Any award given has the purpose of preserving the viability of the business of the tenant and the landlord’s solvency.
- The arbitration procedure involves 3 stages: pre-arbitration, the arbitrator’s eligibility, and the arbitrator’s assessment of relief from payment.
- Allows a stay of debt of any claims issued between 10/11/21 and the day that the bill is passed.
- The arbitration process does not apply to businesses that were not required to close during the pandemic, for example, offices.
Additionally, the bill does not apply to rent arrears that were accrued outside of the ringfenced period.
What Does This Mean for You and DCBL?
Alongside this, the current embargo protecting commercial tenants from forfeiture and restrictions on the use of CRAR will be lifted.
This will be lifted from the 25th of March 2022 unless any legislation is passed ahead of this time.
This means that you can instruct our certificated enforcement agents to recover rent arrears and enact forfeiture of commercial leases. This will apply if the debt has occurred outside of the ringfenced period.
The ringfenced period was mandated on 21st March 2020 and ended for all sectors in England and Wales on 07/08/21.
Restrictions were lifted throughout this period, for example, non-essential retail was lifted on 12/04/21 (in England) and 07/08/21 (in Wales).
DCBL has over 75 years of collective experience in recovering commercial rent arrears.
We have invested in our people and technology to ensure a swift and favourable result on every occasion.
Our approach protects clients’ and landlord/tenant relationships, as well as acts in an ethical and compliant manner to collect debts.
I Want to Enforce CRAR Proceedings – What Is the Process?
If a once reliable tenant has started to get into the habit of not paying the rent on time, hesitation should be avoided to collect this.
Commercial Rent Arrears should not have to feel like a chore to recover, especially with the help of CRAR proceedings.
The first step of the process is applying for a Warrant of Control, which is a legally binding document which is awarded to the tenant with rent arrears by the high court.
The warrant itself allows high court enforcement agents to take control of the goods, and once this has been filled out, you can instruct DCBL to recover the rent.
Upon instruction to recover the rent, our team of high court specialists in CRAR proceedings will begin enforcement action. This starts by issuing the tenant with a 7-day Notice of Enforcement.
It should be noted that the rent arrears must be at least 7 days’ worth or more at the time that the CRAR notice of enforcement is served.
If no payment isn’t made, we will attendance the property and remove the goods to sell at auction. These will be used to pay for the overdue commercial rent arrears.
Why Choose DCBL for Commercial Rent Arrears Recovery?
For any commercial landlord that is owed money by one of their tenants, choosing the right process of recovery can be a time-consuming process.
However, there should be only one option when it comes to Commercial Rent Recovery, and that is choosing DCBL.
At DCBL, our high court enforcement agents ensure that rent arrears are recovered swiftly, efficiently, and ethically.
The solution that we provide is categorically FREE, meaning the cost of our services are added to the outstanding arrears.
Not only this, but upon successfully recovering the rent your monies are remitted within 24 hours.
Throughout the recovery process, we are mindful at ensuring we protect the existing Landlord/Tenant relationships. The purpose of this is to help maintain tenant and business networks.
Do you have commercial rent arrears that have not been paid? Contact our specialists today.