CRAR | The COVID Lowdown | Commercial Rent Arrears

We know that many commercial landlords are looking for ways to keep tenants in situ. In June the UK Government published a Code of Practice for commercial property practices – see https://bit.ly/38rsrji.

What is CRAR?

CRAR – Commercial Rent Arrears Recovery – replaces the old Common Law remedy of distress for rent.

The Government’s involvement in these contractual commercial relationships is perhaps surprising obvious – as we emerge from the peak of the pandemic, we must protect the economy from the aftershocks of 3 months of lockdown. Keeping tenants trading, and rents being paid is all part of protecting people’s jobs and livelihoods in the weeks and months ahead.

COVID Legislation – Commercial Rent Arrears Recovery procedure

Under the COVID legislation introduced by the Government to achieve this aim, commercial rent has to be in arrears for 189 days before a landlord can start a Commercial Rent Arrears Recovery procedure CRAR for short.

So, the question came in from our client community as to how to calculate the 189 days and we thought we would share our research to clarify the process.

The starting point is that many commercial leases, commercial property leases provide for rent recovery to be paid on the traditional “quarter day” system which has come down through history to be the following:

• 25 March – Lady Day – The Feast of the Annunciation

• 24 June – Midsummer Day – The Feast of St John the Baptist

• 29 September – Michaelmas – The Feast of St Michael and All Angels

• 25 December – The Feast of the Nativity

New leases in England and Wales may use more up-to-date quarter days such as 1st January 1st April 1st July and 1st October. Either way, a landlord needs to check the terms of the lease if the rent is paid in advance or if the rent due on the quarter-day is payable in arrears.

Most commercial leases contain a requirement for the tenant to pay the annual rent by equal quarterly payments in advance under the Quarter Day system. During the lease term, the rent payments fall due on the quarter day itself and the entire sum for the quarter is due by or on that date. This means that in normal times a commercial landlord only has to wait 7 days before starting the commercial rent arrears recovery or CRAR process. However, under emergency legislation, that period has been increased to 189 days.

The impact of this is obvious. The time in which a CRAR Notice can be served will be stretched to over 2 quarters of rent. So rent due on the June quarter day cannot be enforced by CRAR until the September and December quarter days have passed – just count forward 190 days to get you the date on your calendar when you can enforce.

A point worth noting is whether the rent is payable in advance or in arrears and to calculate the 189-day period on a calendar. Once the 189 periods has cleared either way a landlord can go ahead and serve a Notice of Enforcement under the commercial rent arrears recovery legislation and CRAR Regulations.

If a commercial landlord finds this all too longwinded then the path to issue a claim for the outstanding rent, along with all the other costs such as service charges, insurance premiums, shared services, can all be added into a county court claim. The point here is that the landlord is not restricted to just the pure any win no fee rent arrears collection but can include all the other charges payable by the tenant as per the lease.

Landlord and Letter Before Action

A landlord must observe the Pre-Action Debt Protocol when sending a Letter Before Action prior to a claim being issued. This may mean giving a sole trader commercial tenant 30 days in which to respond to the Letter before a claim can be issued. This won’t apply to a trading partner or company, and a claim can be issued in as little as 7 days of a suitable Letter being sent.

A claim can follow, and if there is no response, then judgment can be entered in as little as 19 days. After that judgment can be enforced using a Writ of Control with enforcement agents attending (as if under a CRAR) to compel payment.

Shergroup enforcement agents are chosen for their skills in interacting with the public. By taking legal control of goods at a commercial address, they become a catalyst for an outcome. The aim of the course is to collect payment in full without leaving the tenant in a difficult place. It may also mean a payment plan which up until our arrival on site, may not have been “on the table”.

Can you force entry into commercial premises?

Yes, we can but we like to have written instructions from our client confirming they want our Enforcement Agents to take this step.

How do I recover rent arrears from commercial tenants who have a licence?

To recover rent arrears from commercial tenants under a licence you will need to issue a county court claim and then enter judgment. We can assist you with this entire process. Here’s a link to upload your information

Can you seize my commercial tenant’s assets at other locations to pay rent arrears?

If you want to go for the shorter CRAR procedure, then we can only enforce at the address on the lease. But a county court judgment gives us the flexibility to enforce at any address of the commercial tenant’s business where goods are located. To start the ball rolling please fill in our short enquiry form using this link

What can the Landlord seize to cover commercial rent arrears?

As with all enforcement action, there are limits to what goods can be taken into legal control. These are set out in the Taking Control of Goods Regulations 2013.

Shergroup service solutions offer a complete one-stop-shop for this entire process – so a commercial landlord can go from Letter Before Claim to Claim to Judgment and then on to Writ using one experienced Business Solutions Advisor.

These services are also offered in segments so if you have a solicitor to handle the legal aspects of recovery but needs assistance on the enforcement side of things. That’s fine – we can help on as little or as much as is needed.

So if you are interested in moving forward on any element of this process please call us on 0845 890 9200 or live chat on our website at www.shergroup.com.