When I began my career life was so simple. An average lease was around 20 pages long, I used to know all my tenants and if a tenant couldn’t be coaxed into clearing arrears an informal visit from the bailiff would usually lead to monies becoming available.
Now as a rule leases are at least 50% longer, I don’t know all my tenants and from April 2014 the right to recover arrears of rent for commercial premises is to be replaced with Commercial Rent Arrears Recovery (CRAR).
I have already mentioned one of the key points of CRAR in that it only applies to rent arrears due under lease of commercial premises. CRAR cannot be used for premises that are either occupied or let as a dwelling, which may include premises in mixed use.
CRAR will only apply to a “tenancy” as evidenced in writing. As it appears extremely rare to come across tenancies which are not in writing this would not appear to be an issue.
CRAR will only be available in respect of arrears of “basic” rent, together with VAT and interest on the basic rent. I have to admit I am very surprised to find and consider it illogical that CRAR will not be available for service charge arrears, insurance charges or rates even if these sums are reserved as “rent” in a lease. This raises the question where does this leave inclusive rents?
Something I find really strange, if not baffling, is that landlords will be required to serve a “notice of enforcement” on the tenant before sending in enforcement agents. Seven clear days notice will need to be given. Landords will be able to apply to a court to ask that the notice period is reduced if they believe that there is a serious risk of tenants removing the goods. It’s going to be interesting to see how many applications are made asking that the notice period is reduced and how the courts will consider such matters. With the element of surprised lost how many times are enforcement agents going to be instructed to attend only to discover the tenant has either moved all his goods of value or disappeared altogether?
The final key change is that only an enforcement agent authorised in writing by the landlord can seize goods, landlords themselves will no longer be able to carry out the distraint.
Where does all of this leave us? If nothing else I suggest CRAR is likely to lead to landlords increasingly demanding rent deposits and for those deposits to cover service charge arrears, insurance rent and rates for up to 6 months. I also suggest landlords are increasingly going to demand more than one personal guarantor.
A positive or retrograde step toward the age old problem of recovering arrears – I leave you to decide. Is CRAR a positive move for prospective tenants and commercial lettings generally – for the moment I should like to reserve judgement
Jeremy’s jottings do not constitute advice on any specific matter. The information is provided for the purposes of general information and interest. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it. No liability can be accepted by Lawson Commercial for any action taken or not taken as a result of the jottings.