On 06 April 2014 Distress for Rent was replaced by Commercial Rent Arrears Recovery [CRAR].
CRAR can only apply to SOLEY commercial premises i.e. a pub with living above included in the same lease then the Landlord cannot use CRAR.
To undertake this process there must be a valid WRITTEN lease agreement, and the Landlord can only distrain in respect of pure RENT, VAT & INTEREST and not in respect of Electric, other service charges or insurance etc.
There is no need for any court order, although in certain circumstances they can be applied for, but the rent must be at least 7 days in arrears and a notice must be served on the defaulting tenant using an “enforcement agent”, giving at least seven clear days’ notice (excluding Sundays and bank holidays). The Notice must specify certain details in relation to the debt, and must be served, either by post, hand, fax and electronic communications such as email.
There are limits as to what the Agent can and cannot distrain on and specific times that they can attend the premises. The walking possession is replaced with a Controlled Goods Agreement (CGA). The effect is similar but if breached, two clear days’ notice must be given before the enforcement agent re-enters the property.
The minimum period goods must be held for before sale will be 7 days and a notice of sale issued (unless the goods would become unsaleable or their value would be substantially reduced). The maximum period for taking control of the goods is 12 months, with applications for a further 12 month extension allowed.
The sale of goods must be via Public Auction.
Commercial Rent Arrears Recovery does not affect a landlord’s right to Forfeit the Lease
CRAR will cease to be exercisable when the lease expires, except for in the following circumstances:
- In relation to goods taken control of under it, before the lease ended or if the following conditions are met:
- The lease was not ended by forfeiture; not more than 6 months has passed since the end of the lease; rent is due from the person who was the tenant at the end of the lease; that person remains in possession of any part of the demised premises; any new lease under which that person remains in possession is a lease of a commercial premises; and the person who was the landlord at the end of the lease remains entitled to the intermediate reversion.
- Where a superior landlord has the right to exercise CRAR against its tenant, and there is a sub-lease in place, the superior landlord may instead serve a notice on the sub-tenant requiring the sub-tenant to pay its rent directly to the superior landlord, not to its own landlord. The notice must set out the amount of the arrears owed to the superior landlord.
- Should there be a sub-lease in place, the superior landlord may serve notice on the sub-tenant requiring them to pay their rent direct to the superior landlord. A minimum of 14 days’ notice must be served on the sub-tenant.