Commercial Rent Arrears Recovery in 2021

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Coronavirus regulations are affecting the future use of CRAR. There are limited alternatives for landlords.

Current Position

As 2021 starts the use of CRAR, Commercial Rent Arrears Recovery, by landlords is still severely restricted.

There must be a set number of days rent due at the two triggers points.

• For actions commenced after 25 December 2020 there must be a total of 365 days rent owing.
• From 25 March 2021 to 23 June 2021 there must be a total of 457 days rent owing.
• From 24 June 2021 to 30 June 2021 there must be a total of 554 days rent owing.

The two trigger points are:

1. At the time when the notice of enforcement is given. (Compliance Stage)
2. At the first time that goods are taken control of after that notice. (Enforcement Stage)

Many tenants are abusing this system and keep making part payments to prevent CRAR being exercised.

Other Options

Forfeiture of Lease

This is currently not an available option for none payment of rent or other charges regardless of how much this is and when these arrears were occurred.

The landlord’s contractual remedy of Forfeiture of Lease has been banned by Act of Parliament until at least 30 June 2021. This is under Section 82 of the Coronavirus Act.

Statutory Demand

The use of the 1986 Insolvency process is another tool in the landlord’s arsenal to recover rent arrears.

If the debtor is a limited company then £750 or above must be owed. If the debtor is an individual then £5,000 or above must be owed.

The use of statutory demands and winding-up petitions were suspended 1 March 2020 under schedule 10 of the Corporate Insolvency and Governance Act 2020. The suspension was recently extended until 31 March 2021.

Winding-up petitions are not banned totally. The petition will be reviewed by the court to ensure the inability to pay is not due to Covid-19. Consequently, same as Forfeiture of Lease the government have in effect banned this option as well.

Writ of Control

The only option currently available to you to enforce your rights to commercial rent is to gain a judgment in the county court (CCJ). You then transfer this up to the High Court for enforcement by an Authorised High Court Enforcement officer (HCEO).

There are advantages to this approach:

1. The claim can include other sums due such as service charges, insurance, electricity, etc.
2. Usually all legal costs, including the costs of solicitors, can be charged to the tenant under the terms of the lease.
3. The writ can be executed anywhere in England and Wales, not just at the demised premises.
4. The High Court Enforcement Officer can use force to break into commercial premises.
5. As there is little argument over what rent is due then it should go through the court system quickly as a default judgment.

Future of Commercial Rent Arrears Recovery (CRAR)

The government do not want the High Street, the leisure industry and businesses shut down by bailiffs once the coronavirus crisis has ended.

We believe that it will be a long time, if ever, that CRAR will be available as it previously operated because it has no judicial overview. We believe it will either stay as 366 days rent due or be abolished.

As a consequence landlords wanting to recover money will have to use the court system to pursue their debtors like everyone else.

The volume of cases going through the courts will restrict how quickly enforcement action is started. Once the case is in the court system the debtor can if they wish apply for an order to vary the judgment for a payment arrangement.

I have a question

Telephone or email Frank G Whitworth for advice.