What does the CRAR scheme mean for landlords and tenants with rent arrears?
The Commercial Rent Arrears Recovery (CRAR) scheme is a lawful process landlords of commercial properties employ to reclaim overdue rent from tenants who remain on the premises.
So, if you’re a commercial tenant and you’re late with your rent, this procedure could be initiated against you. But how does it operate and what rights do you have?
How does the CRAR scheme function?
The Commercial Rent Arrears Recovery scheme is solely applicable for recovering unpaid rent, excluding service charges, insurance, or other dues.
It is restricted to commercial tenancies and excludes mixed-use or residential tenancies. Additionally, a minimum of seven days’ rent arrears is required for the CRAR scheme to be applicable.
To initiate the process, the landlord must issue you with a seven-day notice of enforcement. After the notice period expires, if you haven’t cleared the rent arrears entirely, enforcement agents can enter the property through an open or unlocked door to seize goods.
CRAR can be utilised by a landlord even if it’s not mentioned in the lease, though it’s only applicable if you have a written lease.
After the notice is served, the enforcement agents have a 12-month window to seize the goods. Once seized, the goods must be appraised and retained for at least seven days before they can be sold.
When should you use the CRAR scheme?
If you fail to meet your obligations under a commercial lease and cannot pay your rent, your landlord has various options to consider. Depending on your lease terms, they might utilise the deposit you provided at the lease commencement to offset the rent arrears.
Alternatively, they might pursue possession of the property through forfeiture or initiate court proceedings to recoup the outstanding rent.
Another option available to landlords is the Commercial Rent Arrears Recovery scheme. Implemented in 2014, it permits commercial landlords to authorise an enforcement agent to enter the premises, seize control of their goods, and sell them to settle the debt.
What would be your rights under CRAR?
As a commercial tenant, upon receiving the notice of enforcement, you are prohibited from removing or selling goods from the property. However, you may apply to the court for a set-aside or a delay of execution, potentially granting you more time to settle your debts.
Upon arrival, the enforcement agents will seek to either:
- Enter into a controlled goods agreement
- Remove goods for sale
- Clamp a vehicle
- Secure goods within part of your premises
If your business is financially stable, opting for a controlled goods agreement could be a good option. This allows you to negotiate a repayment plan over time while retaining the goods on your premises. Nonetheless, failing to keep up with the agreed repayments may result in the seizure of the goods.
What goods the enforcement agents can take?
Enforcement agents are only authorised to seize goods that belong to you or are co-owned by you. They cannot take goods that are solely owned by a third party. Additionally, they are prohibited from seizing essential goods, goods in use at the time of entry, or goods directly associated with trading and valued at less than £1,350.
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Seeking professional help to pay your commercial rent?
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I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.