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What are landlords and tenants making of the Commercial Rent Arrears Recovery scheme (CRAR)? Lucy McCormick of Henderson Chambers comments on the new scheme.
On 6 April 2014, the new Commercial Rent Arrears Recovery (CRAR) procedure came into effect. This replaced the ancient remedy of ‘distress’, which entitled a landlord to recover unpaid rent by entering a tenanted property without notice, seizing goods and selling them. A few months on, it is now possible to comment on how CRAR is bedding in in practice.
The key change is that the tenant must now be given seven clear days’ notice in writing of the intention to enter the premises to seize goods. This is intended to give the tenant an opportunity to negotiate or take legal advice, but many feel it simply gives the wayward tenant an opportunity to remove valuable items. Where there is a particular reason to believe it is ‘likely’ that the goods will be disposed of, the landlord may apply to the court for permission to give shorter notice. However, there is no doubt that the new regime has ‘rebalanced’ the rights of tenants and landlords towards the tenants in many respects.
The scope of CRAR is much narrower than that of its predecessor. Perhaps most importantly, it does not apply to leases of mixed residential/commercial properties. Any use of the premises for residential purposes (unless such use is a breach of the lease) will prevent CRAR from being an option for the landlord.
One further major change is that CRAR may only be used on a lease which is “evidenced in writing”. A purely oral lease is not within its scope. There is, however, no need for the lease document to be signed to allow CRAR to bite. Precisely the extent to which a lease must be evidenced in writing – on the spectrum between ‘back of an envelope’ scribble and fully
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