The Commercial Rent Arrears Recovery Procedure

Business Tenancies

The Tribunals, Courts and Enforcement Act 2007 received Royal Assent on 19 July 2007. Part 3 is not yet in force, but it will change the method by which landlords recover debts from commercial tenants.
The new commercial rent arrears recovery (CRAR) procedure will replace the common law ‘distress’ remedy whereby the landlord is permitted to enter commercial premises without warning and seize property to reimburse payments ‘reserved as rent’ under a lease. As well as the rent, this can also include interest on late payments, service charges and VAT. Under the new procedure the landlord must give the tenant notice before entering the premises, and will only be able to seize assets to cover rent. They will not be able to claim assets to cover other debts, as is allowed currently. The rent must have become due and payable, and the amount owed must be capable of being calculated with certainty. An amount will also be set as a minimum threshold for unpaid rent, and the CRAR procedure will not be available unless this the rent arrears exceed this amount at the time that goods are seized. 

The new procedure has been included in the Act to in order to comply with the European Convention on Human Rights. It will give to commercial tenants very similar protection as is available to residential tenants. However, it appears that this procedure will not be available to landlords of mixed use properties against commercial tenants where the lease contains both commercial and residential elements. The provisions will only apply to premises used solely for business purposes; they will not apply where some part of the premises is let as a dwelling. However, if part of the premises is used as a dwelling, the CRAR procedure may be used where this use is undertaken by the tenant in breach of the lease. The remedy of CRAR may be preserved where the lease prohibits the tenant from using the premises for anything other than business use.

The common law still applies currently, as the Ministry of Justice has advised that the Government intends to implement the CRAR procedure in April 2012.

April 2009