Changes to CRAR under the Coronavirus Act 2020
The Coronavirus Act 2020 imposed temporary changes to the amount of rent that must be outstanding before landlords can use the CRAR procedure. During this time a much higher level of arrears was required. As of 26 March 2022 these changes are no longer in effect and the regular arrears threshold (a sum equivalent to 7 days’ rent) applies.
What is CRAR and how does it work?
Commercial Rent Arrears Recovery (CRAR) is a statutory procedure which allows landlords of commercial premises to recover rent arrears by taking control of the tenant's goods and selling them. CRAR came into force on 6 April 2014 and applied with immediate effect to all new and existing commercial leases from that date onwards.
In order to use CRAR, a landlord must provide 7 days' notice of enforcement. Once this period has expired, Certificated Enforcement Agents may enter the property (through an open or unlocked door) to seize goods.
CRAR applies whether or not reference is made to it in the lease.
There are anti-avoidance provisions in place which prevent landlords from creating contracts which modify CRAR or otherwise including alternate ways to recover rent arrears by seizing goods. However, the landlord and tenant can agree to limit the application of CRAR.
What about sub-tenants?
Landlords can require sub-tenants to pay rent directly to them to clear any rent arrears, using a statutory procedure very similar to CRAR (but 14 days notice is required rather than 7).
Are there limitations to the application of CRAR?
CRAR only applies to premises which are wholly commercial in use
CRAR can only be used to recover principal rent - it cannot be used to recover other sums (eg service charges and insurance premiums)
CRAR can only be carried out by Certified Enforcement Agents (not other types of bailiffs) following the statutory procedure
Who can use CRAR and what are the requirements?
As a general rule, only landlords of commercial premises, where the tenant remains in occupation of those premises, can use CRAR. There must also be a lease in writing. A contractual licence to occupy will not suffice.
A minimum sum equivalent to 7 days' rent needs to be outstanding before any action can be taken, and a notice of enforcement containing prescribed information must be given to the tenant at least 7 clear days before any goods are taken. It is possible to ask the court to reduce the notice period if there is a risk of tenants removing goods from premises (eg during an insolvency).
Other requirements of CRAR include:
details must be included in the notice served on the tenant
notice must be served in a specific way
time limit for seizing goods from the notice being served (12 months)
goods can only be seized at certain times
only certain types of goods can be seized (and an inventory must be made)
goods seized must be valued and not be sold for at least 7 days
When can CRAR not be used?
CRAR cannot be used if:
the leased property is mixed use or residential
the lease has come to an end (subject to certain exceptions)
any of the arrears cannot be calculated with certainty (eg in the case of turnover rents)