Receiving rent from a commercial property is a lucrative business venture. Rent arrears can, however, be a weakness in your property leasing. Traditionally, landlords used a right called distress to seize a tenant’s goods and sell them to recover outstanding arrears.
The right of distress has however been replaced by CRAR (commercial rent arrears recovery). This right still allows landlords to seize and sell a tenant’s goods to recover rent, but there are differences. Here are some key elements of CRAR.
Notice of Enforcement
The tenant must be given a one week window before the CRAR. If however, the court has reason to believe that the tenant might dispose of their goods within this period, it can give a shorter window period. CRAR must be enforced within one year of the notice given by the court. There are times a tenant and landlord reach an agreement on the arrears repayment, but if the tenant breaches it, the CRAR is still enforceable within a year of the breach.
Amount of Rent Arrears
There exists a minimum amount below which CRAR is not exercised. This minimum is an amount equivalent to a week’s rent. The tenant must have rent arrears equal to or exceeding the minimum rent amount before an enforcement notice is served. Though CRAR can be used for recovering interest and VAT on outstanding rent, these shouldn’t be included when computing this minimum amount.
CRAR can only apply to commercial property leases. There should exist a landlord-tenant relationship for CRAR to be enforced. The contract must be in writing. Oral tenancies do not, therefore, apply in CRAR.
The best people to enforce your CRAR are certified bailiffs. These professionals have statutory powers that allow them to seize goods and sell them to offset rent arrears. They can also negotiate a short-term arrangement for repayment with your tenant. In this instance, they seize the goods and hold them on-site pending loan payment.