Commercial Rent Arrears Recovery (CRAR): Step by Step Guide

If a commercial tenant falls behind on rent, a landlord has a few options. One of the quicker ones, at least on paper, is Commercial Rent Arrears Recovery, usually shortened to CRAR. It lets a landlord send enforcement agents to the premises to take control of the tenant's goods and, if the arrears still are not paid, sell them to cover what is owed.

CRAR was brought in by the Tribunals, Courts and Enforcement Act 2007 and came into force in April 2014. It replaced the old common law remedy of distress for rent, which had been around for centuries and was widely seen as outdated and open to abuse. The new regime is more structured, with set notice periods and clearer rules on what agents can and cannot do.

When CRAR can be used

CRAR is narrower than the old law of distress, and landlords sometimes assume it applies when it does not. The main conditions are:

• The lease must be in writing. Oral tenancies are excluded.
• The premises must be wholly commercial. If any part is let or occupied as a dwelling, CRAR is unavailable, even if the residential element is small.
• The sum owed must be pure rent. Service charges, insurance rent and other sums dressed up as rent in the lease do not count unless they genuinely are rent.
• At least seven days' net unpaid rent must be outstanding both when the notice of enforcement is given and when the agent takes control of goods. Net here means after any permitted set-offs the tenant is entitled to.

If any of these are missing, the landlord needs to look at other routes.

The notice of enforcement

Before anything else happens, the landlord, acting through a certificated enforcement agent, must give the tenant a notice of enforcement. The tenant must have at least seven clear days, not counting Sundays, bank holidays, Good Friday or Christmas Day. The notice sets out the amount claimed and warns that an agent will attend if it is not paid.

During that window the tenant can pay, negotiate, or apply to the court for more time. In practice the notice often does the job on its own, because many tenants would rather settle than have agents turn up. If the tenant tries to move goods off site to avoid enforcement, the landlord can apply to the court for an order shortening the notice period.

It is worth noting that the notice period and the arrears threshold were temporarily raised during the pandemic to protect commercial tenants. Those temporary measures have since ended, but landlords should always check the current position before serving notice, as the rules have been adjusted before and could be again.

The role of the enforcement agent

Only a certificated enforcement agent can carry out CRAR. Certification is granted by a County Court judge under the 2007 Act and associated regulations, and it has to be renewed every two years. If an agent acts without a valid certificate, the enforcement can be challenged and the landlord may be exposed to claims for trespass or wrongful interference with goods. It is sensible to check that the firm instructed has current certification.

A landlord cannot simply turn up and start removing things. The agent can enter the premises during permitted hours, generally 6am to 9pm, or during trading hours if those fall outside that window. They cannot force entry on a first visit in the ordinary course, though a court can authorise forced entry in limited circumstances later on.

In most cases the agent will take control of goods by a controlled goods agreement. In plain terms, the tenant signs a written agreement listing the goods and promising not to remove or sell them, but is allowed to carry on using them in the meantime. If the tenant pays what is owed, the matter ends there. If they do not, the agent can come back, remove the goods and sell them at auction, usually after giving at least seven days' notice of sale.

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What can and cannot be taken

Not everything on the premises is fair game. Exempt items include:

• Tools, books, vehicles, computers and other equipment the tenant needs for their work or study, up to a value set in regulations.
• Goods that do not belong to the tenant, such as leased equipment, stock held on sale or return, or items consigned to them or held on trust for someone else. This usually needs to be properly evidenced.
• Fixtures, which are treated as part of the premises rather than goods.
• Perishable goods in certain circumstances.

Third parties who believe their goods have been wrongly taken can make a claim to the agent, and ultimately to the court, to have them released.

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The forfeiture trap

One point that catches landlords out is how CRAR interacts with the right to forfeit the lease. Using CRAR amounts to treating the lease as continuing, because rent can only be due under a live tenancy. The courts have held that exercising CRAR waives the right to forfeit for the rent arrears already demanded.

So if the real aim is to get the tenant out and re-let the premises, CRAR is usually the wrong tool. Forfeiture should be considered first, whether by peaceable re-entry or by court proceedings. Once CRAR has been used, that door may have closed for the arrears in question.

CRAR compared with a County Court claim

The obvious alternative is to issue a money claim in the County Court for the unpaid rent. The two routes do different jobs.

CRAR is quicker and does not involve issuing proceedings. If the tenant has valuable goods on site and is simply slow to pay, the threat of agents arriving often produces payment within days. There are no court fees, though the tenant will be charged the agent's fees on top of the rent at rates set by regulations (the current figures are on GOV.UK).

A County Court claim is slower and involves an issue fee, and possibly a hearing fee, but it produces a judgment that can be enforced in several ways, including against bank accounts, earnings from sub-tenants, or by a charging order over property. It also works where CRAR is not available, for example on mixed use premises, where the main dispute is over service charges, or where the tenant has already vacated and there is nothing left on site to take.

Some landlords use both. They might pursue CRAR for rent while issuing a separate claim for service charges or dilapidations. The choice depends on what is owed, what is on the premises, and whether the landlord wants to keep the tenant or end the lease.

Before you act

CRAR is a useful remedy but it is technical, and mistakes can be expensive. Before serving notice, it is worth running through a short checklist:

• Is the lease in writing and the property wholly commercial?
• Is the debt pure rent, and is at least seven days' net rent outstanding?
• Are the enforcement agents properly certificated?
• Is there any intention to forfeit the lease? If so, CRAR should probably wait.
• Are there likely to be valuable goods on site that actually belong to the tenant?

It is also worth thinking about the wider cost. Sending agents into a tenant's premises can end any chance of a negotiated outcome and may damage a long-standing commercial relationship. Getting the process wrong can lead to claims by the tenant or third parties for wrongful interference with goods. For anything other than a straightforward case, taking advice from a solicitor or a reputable enforcement firm before serving notice is usually money well spent.

The Next Step

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