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Key points to remember in relation to the recovery of Rent Arrears from Commercial Tenants - CRAR

  • CRAR is only available to landlords of written leases of commercial premises and will not be available where the premises are let or occupied as a residential dwelling (unless the occupation is in breach of a lease). For example, it will not be available to landlords of shop premises with flats above within the same lease. Property owners may wish to consider letting such premises on separate residential and commercial leases when CRAR comes into force.
  • CRAR is only available in limited circumstances after a lease has come to an end
  • CRAR can only be used to recover rent, VAT and interest, but not other sums such as service charges or insurance, regardless of whether they are reserved as rent. Where a rental figure includes such sums, only the proportion reasonably attributable to the possession and use of the premises is recoverable under CRAR.
  • CRAR can only be exercised if the outstanding sums (less interest due under the lease, VAT and any set-off a tenant is entitled to make) exceed the minimum amount of 7 days' rent.
  • CRAR can only be exercised by an enforcement agent (as defined in the regulations).
  • Before CRAR can be exercised 7 clear days' notice of enforcement must be given to the tenant. The Court has the ability to order that the notice period is shortened where it is satisfied that without such order it is likely the goods will be moved to avoid being taken control of.
  • The enforcement agent must exercise CRAR within 12 months of the date of the enforcement notice.
  • An enforcement agent is permitted to enter the leased premises in order to exercise CRAR on any day of the week between the hours of 6am and 9pm or, where the premises is open outside of these hours, during the hours that the premises is open for business.
  • The enforcement agent can apply to court for a warrant to use reasonable force to enter the premises.
  • The enforcement agent is only permitted to take control of goods belonging to the defaulting tenant. Goods which are necessary for the tenant's personal use or in connection with employment, business, trade, profession, study or education are exempt up to a total value of £1,350. Items in use by the tenant may not be taken control of if such action is likely to result in a breach of the peace.
  • The enforcement agent may not take control of goods which have a value which is more than the debt together with costs. They must wait at least 7 clear days before they can sell the goods and also give 7 clear days' notice of sale to the tenant - unless the goods would otherwise become unsaleable or their value substantially reduced.

For more information please contact Richard Tomlinson at Lawson-Werst Commercial on 0116 212 1000.

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