What is CRAR and how does it work?
CRAR is a statutory procedure that 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 applies 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 that prevent landlords from creating contracts which modify CRAR or otherwise include 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. However, 14 days' notice is required rather than 7days'.
Are there limitations to the application of CRAR?
CRAR only applies in certain circumstances. Specifically, CRAR:
only applies to premises that are wholly commercial in use
can only be used to recover principal rent - it cannot be used to recover other sums owed (eg service charges and insurance premiums)
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 insolvency).
Other requirements of CRAR are as follows include:
details must be included in the notice served on the tenant
notice must be served in a specific way (eg by post, hand or electronically via fax or email)
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)
the commercial property is located in Scotland. For more information, read Recovering commercial rent arrears in Scotland