CRAR – An unfair advantage for Defaulting Tenants? April saw the introduction of the new Commercial Rent Arrears Recovery (CRAR) rules, requiring 7 days’ notice to be given to a Tenant of an intention to seize goods. The initial perception by Landlords of the new rules had been that it abolished the element of surprise. Landlords had largely criticised such changes as allowing Tenants an unfair advantage, with those Tenants who were inclined to do so, an opportunity to remove assets from the Premises before seizure. Tenants had conversely welcomed the changes in abolishing what they perceived as an unfair remedy for Landlords where monies may only be overdue by one or two days, causing adverse effects to their business without warning. However, an important provision within CRAR which had largely been ignored is one which can ensure the element of surprise remains and ensures the changes are not such a stark contrast to the old procedure. It is imperative Landlords understand the new procedure and comply with the rules to avoid adverse consequences. ‘Distress’ was previously a self-help remedy allowing immediate seizure of goods owned by a Tenant in order that they be sold to discharge arrears owed. Landlords had the element of ‘surprise’ available to them as soon as a Tenant entered arrears.
ThinkingBUSINESS June-July 2014
Where a Landlord can show good reason to believe a Tenant may deliberately remove assets from the premises (i.e. assets are easily removed or of high value), a Landlord can Apply to reduce the notice period required under CRAR, ensuring an almost immediate seizure of goods. Whilst this imposes a further step and cost to the Landlord, those who have previously encountered problems with arrears from Tenant’s, can draw heart that the perceived
advantage to Tenants might not be as great as initially believed. Whilst the exact circumstances in which the notice period might be reduced are yet to be fully determined, cases testing these margins are likely to evolve quickly as Landlords perceive a real advantage in enforcing against defaulting Tenants. CRAR has imposed several additional changes including that it may only be used towards rent arrears (not service charge or rates), enforcement must be undertaken by a certified bailiff between 9am to 6pm (or the Tenants usual business hours), and cannot be used against assets required for the Tenants trade (subject to a fixed aggregate limit). Accordingly, commercially aware Landlords are seeking to regain the advantage by obtaining additional Personal Guarantees, ensuring increased rent deposits are held from the outset or the use of alternative enforcement options as soon as a Tenant defaults upon their Lease. Should you wish to discuss the recent changes in CRAR or the commercial options available for enforcement, please contact Andy Rudkin at Buss Murton on 01892 502367 www.bussmurton.co.uk.
Official magazine for Kent Invicta Chamber of Commerce - June/July 2014