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Enforcement of arrears: CRAR and essential considerations for landlords

Posted on 27th November, 2018

The high street continues to be a ground for concern to many commercial landlords with many tenants seeking to reduce rents and others falling into arrears.

A right of forfeiture (or a right to re-entry) is generally written into most commercial leases and can be triggered where a tenant falls into arrears, permitting the landlord to bring the lease to an end. It is a useful weapon in a landlord’s armoury, as long as the landlord is confident another tenant can be lined up.

The quandary for many landlords is whether to simply effect peaceful re-entry to forfeit the lease, or to issue formal forfeiture proceedings through the courts.

The Tribunals, Courts and Enforcement Act 2007 and Taking Control of Goods Regulations 2013 introduced Commercial Rent Arrears Recovery (“CRAR”), abolishing landlords’ common law remedy right of distress. Premises must be entirely commercial, not mixed use. Rent must be a minimum of 7 days overdue and 7 days’ notice must be given to the defaulting tenant prior to being able to seize goods for sale.

CRAR is not be an ideal choice where payment of service charges, or insurance premiums, as well as rent is due.

The recent case of Thirunavukkrasu -v- Brar & Brar [2018] EWHC 2461 (Ch) highlighted landlords need to weigh up their priorities and consider whether they wish to recover rent or their premises back.

Thirunavukkrasu had failed to pay rent due in December 2015. The landlords effected CRAR on 1 February 2016 to recover rent payments. They then attempted to exercise their right to forfeit on 12 February 2016.

On appeal, the High Court ruled the right to forfeit had been waived, due to exercising CRAR.

Faced with rent arrears, landlords need to carefully considering their options; exercising CRAR or another form of enforcement (for example issuing County Court proceedings, or a statutory demand) is likely to waive landlords’ right to forfeit.

Please do not hesitate to contact Inderjit Gill or another member of the Dispute Resolution Team to discuss options available.

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