If you default on a commercial lease and are unable to pay your rent, there are several different routes your landlord can choose to take. Depending on the terms of your lease, your landlord may be able to use the deposit you paid at the start of the agreement to cover the rent arrears. Alternatively, they may seek to recover possession of the property via a process known as forfeiture or take court proceedings against you to recover the rent arrears.
Another option landlords have is to use the Commercial Rent Arrears Recovery scheme. It came into force in 2014 and allows commercial landlords to instruct an enforcement agent to enter the premises and take control of your goods before selling them to recover the debt.
How does the CRAR scheme work?
The Commercial Rent Arrears Recovery scheme can only be used to recover unpaid rent and not service charges, insurance or any other sums due. It only applies to commercial tenancies and not mixed-use or residential tenancies and at least seven days of rent must be outstanding for the CRAR scheme to be used.
To instigate the process, the landlord must provide you with seven days’ notice of enforcement. Once the notice period is over, if you have not paid the rent arrears in full, enforcement agents can enter the property via an open or unlocked door to seize goods. Importantly, CRAR can be used by a landlord even where no reference is made to it in the lease, although it only applies if you have a lease in writing.
From the notice being served, the enforcement agents have a 12-month time limit to seize the goods. Once the goods are seized, they must be valued and held for at least seven days before they can be sold.
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As a commercial tenant, once you receive the notice of enforcement, you cannot remove or sell goods from the property. What you could do, though, is apply to the court for a set-aside or a delay of execution, which could give you more time to pay what you owe.
Once the enforcement agents arrive at the premises, they will look to either:
Enter into a controlled goods agreement
Remove goods ready for sale
Clamp a vehicle
Lock up goods on part of your premises
If the business is financially viable, entering into a controlled goods agreement could be beneficial. You will have the chance to negotiate a deal to repay the debt over time and the goods will remain on your premises. However, if you fall behind on the agreed repayments, the goods will be seized.
If the enforcement agents remove goods from the site, they must give you an inventory of everything they seize. If you do not have assets that can be sold to recover the debt and cannot pay the outstanding rent, the landlord can withdraw the CRAR notice and seek to repossess the property by forfeiting the lease.
What goods can enforcement agents take?
Enforcement agents can only seize goods that belong to you or that you co-own. They can’t take goods that are wholly owned by a third party. They also can’t take essential goods, goods that are in use when the enforcement officers enter the premises or goods that are directly linked to trading and have a value of less than £1,350.
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