CRAR


Author: Alison Mould


In a previous article (‘Sending in the bailiffs…’), we reported on CRAR (Commercial Rent Arrears Recovery), the new procedure, effective from 6 April 2014, for recovering rent arrears by attending a tenant’s premises and removing goods. Over the last couple of months various regulations have been published by the Ministry of Justice setting out the detail of the new CRAR procedure in anticipation of the new procedure starting on 6 April 2014.

As previously highlighted the main changes are as follows:

  • Only pure rent, interest on pure rent and VAT on pure rent can be recovered using this procedure. Even if reserved as “rent”, service charges, insurance costs, etc. cannot be recovered using this CRAR procedure.
  • Bailiffs, now called enforcement agents (EA), can attend a tenant’s premises from 6.00 a.m. to 9.00 p.m. seven days a week or later, in the case say of a nightclub, if the standard hours of the business are different from the norm.
  • The letting arrangement, the lease, must be in writing. Oral tenancies, such as implied periodic tenancies, agreements for lease and “informal” lettings do not allow this procedure to be used.
  • The CRAR procedure cannot be used on mixed use premises where there is a residential element, premises where residential use is authorised in the lease, or premises where any part of the property is used lawfully as a residence. At the moment mixed use premises do qualify for bailiff attendance by way of distraint.

Perhaps, however, the most discouraging part of the legislation for landlords is that a notice, a notice of enforcement, must now be served by the enforcement agent on the tenant prior to any attendance being made. Once the landlord has instructed the enforcement agent, and it appears from the legislation that it must be the landlord (not an agent, i.e. a managing agent or a landlord’s solicitor) who must instruct the enforcement agent, then the enforcement agent must send a seven clear day notice to the tenant. This notice cannot be served by anybody other than the enforcement agent and it cannot be served prior to the debt falling due. We had wondered whether it would be possible for landlords to incorporate this notice in rent demands. It is not. It can only be served by enforcement agents and only after the quarter day, i.e. when the debt falls due in a normal lease.

The tenant must be given this notice in writing and must be allowed seven clear days before the enforcement agent attends the premises. Seven clear days excludes Sundays and bank holidays.

Methods of service of the notice of enforcement include first class post, recorded delivery post, fax and email.

The clear period of seven days excludes the day of service and the day of expiry. Consequently, the tenant may in fact receive about 12 days’ notice, as follows:

  • 25 June 2014 Landlord instructs EA.
    EA sends notice of enforcement by post.
  • 27 June 2014 Notice of enforcement is deemed to be served.
  • 7 July 2014 EA attends the tenant’s premises to take control of goods.

During the visit on 7 July the enforcement agent can do a number of things, including:

  • secure the goods on the demised premises on which he finds them;
  • remove the goods and secure them elsewhere; or
  • enter into a controlled goods agreement with the tenant.

We believe the most likely route is the third, a controlled goods agreement.

This is an agreement entered into between the enforcement agent and the tenant which sets out the terms upon which the landlord requires the outstanding rent to be paid. That may be by close of business that day. It may be that the landlord is prepared to accept instalments. This is an additional issue which will need to be addressed in advance by the landlord and the tenant. The tenant signs the controlled goods agreement accepting those payment terms.

If the tenant then fails to abide by those payment terms, the enforcement agent must give two clear days’ notice of his intention to re-attend the premises and remove goods. Upon expiry of that notice the enforcement agent can re-attend and remove goods and secure them elsewhere.

If the enforcement agent then intends to arrange for those goods to be sold, then he must give further notices to the tenant.

As can be seen, the new procedures are a lot more lengthy and, indeed, complicated than the old bailiff distraint. Landlords may feel that having to give the tenant what can be a 12 day warning that enforcement agents are to attend allows the tenant to remove goods that could otherwise be taken by the enforcement agent and therefore removes a lot of the benefit of this old self help remedy. There are no penalties for removal during that period of seven clear days.

Removing goods after a controlled goods agreement has been entered into, or after goods have been secured on the premises or elsewhere, is a criminal offence.

These changes have been a long time coming and only time will tell how user-friendly they prove to be.

Alison Mould, Partner, Fladgate LLP (amould@fladgate.com)

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