Commercial Rent Arrears Recovery (CRAR) – What is it and how can we help?

A commercial property landlord may be faced, in the course of property ownership, with unpaid rent by a tenant.

In commercial tenancy arrangements, a specific recovery regime exists which enables recovery of arrears through enforcement action. This is the process known as Commercial Rent Arrears Recovery (“CRAR”).

CRAR came into effect on 6 April 2024. The process provides for a landlord to instruct agents directly, tasked with enforcement, to take over control of a tenant’s assets and sell them to effect recovery of an equal value of the arrears. This can be done without the need to issue Court Proceedings and obtain Judgement.

CRAR only applies to commercial leases, which, for the purposes of the CRAR, are leases in which they are not occupied or let for the purpose of a residential dwelling.

Process

Before a CRAR can be issued, the following conditions need to be met:

• the tenant must be in arrears before giving notice of enforcement
• amount of arrears claims meets the minimum amount set out in the legislation – this is currently stated to be seven days’ rent and
• arrears must still be unpaid at the point when the enforcement action takes effect (being the date the goods are taken).

Once it has been confirmed the conditions are met, there are three stages to the CRAR:

1. Compliance- an enforcement notice is sent out giving notice of the arrears and offers the tenant a seven-day period to pay the arrears;
2. Enforcement- if the tenant fails to pay within the seven-day period, the enforcement officer will make an attendance and seek to take control of the property up the value of the outstanding rent
3. Disposal- the goods seized will be sold at public auction and monies made will the distributed to the Landlord, and the Enforcement company in relation to their costs.

The advantages of CRAR are that the process can be extremely quick and efficient in recovering arrears. This is because, unlike other non-payments, judgment does not need to be obtained in order to instruct enforcement. Under CRAR, enforcement can be obtained as a first port of call. Further, CRAR is a great alternative to issuing proceedings for example, as it limits the costs, as the costs of the enforcement agents are put onto the debt owed by the tenant.

If CRAR is not the right fit for you as a commercial landlord, we can also provide support and guidance not limited to forfeiture, statutory demands, court proceedings and personal guarantees.

If you are a commercial landlord with a tenant and rent arrears, please get in touch today and speak to one of our commercial property dispute specialists who would be happy to discuss your recovery options with you, including but not limited to CRAR.