Commercial property: CRAR and forfeiture webinar Q&A

Here are the questions and answers from our webinar on "Commercial property: CRAR and forfeiture of lease" held on 21st June.

Can CRAR be exercised if the tenant does not pay, can the landlord then instruct you to enforce peaceable re-entry and forfeit the lease?

Yes, they can, however there is case law whereby if you use CRAR and it fails you will need to wait for a new period to fall before you effect peaceable re-entry, you cannot use both CRAR and forfeiture in the same period.

Can CRAR and forfeiture be used at the same time, i.e. re-enter and take control of goods?

No, if you forfeit the lease then the lease finishes, even if you have a controlled goods agreement in place you cannot continue as the relationship ceases to be.

Under peaceable re-entry what counts as a previous attempt which stops a further attempt?

If you have visited the premises and it was occupied at the time, and you couldn’t obtain peaceable re-entry, or the tenant turned up before you could execute the possession. To complete peaceable re-entry, you would have needed to have sealed the perimeter.

Is there anything you can do if it is mixed use premises?

You can only undertake CRAR or forfeiture if there is a separate lease and separate entrance, this is because these two recovery methods are only for commercial premises.

If the premises are mixed use with no separate entrance, then you will need to obtain a County Court Judgement and sue as a debt. If the debt is over £600 you can transfer to the High Court. This can then be enforced through the High Court and you can then use the taking control of goods.

Can you just clarify what goods can be seized from business debtor?

There are restrictions to goods owned, tools of the trade up to the value of £1,350 are exempt from being taken control of.

Any goods that are taken control of must be assets of the company or business, they cannot be personally owned items, we will look for proof and if there are any problems the third party claiming ownership can take this down the third-party claim to goods route.

With CRAR in terms of selling goods, do these need to be sold for a market value or in a specific way. Or can they be sold for any amount to try and recover the unpaid rent?

As enforcement agents, anything that has been taken under the Taking Control of Goods Regulations must be sold for the best possible price, it is recommended that this is done by auctioning the items off. If you can’t as it may be a large part of specialist machinery you can apply to sell on site or an application to sell by a third party.

Can you instruct CRAR on a guarantor?

If the guarantor is at the address then you can, if the guarantor is away from the specific address then you would need to use the correct process as you are not enforcing it under the regulations at the specific address. CRAR only covers the premises covered by the lease, and therefore you could not enforce at any other location.

If you forfeit the lease, can you sell any goods that are left behind to cover rent arrears?

If goods are left behind, you’ll need to put a tort notice in a prominent position, this notice will give them a period in which to collect the goods.

If they do come and collect their goods, then you have no legal rights to contain so must allow their release. If they don’t and you have served a Torts notice you can sell the goods.

In the specific case of a pub, if the tenant (pub landlord) has personally guaranteed the lease, given it is a commercial lease I take it you could undertake CRAR at the demised address and seize his personal goods for example TV in the living accommodation?

No, a personal guarantor to the lease is only the guarantor to the arrears. Your tenant, who is part of the tenancy agreement and named as such is the company or the trading company is the person that rental arrears. The only way you can do this is if the guarantor is also a tenant and it is written into the lease that they are a tenant, they will have to be on the tenancy agreement for you to be able to use CRAR and take control of goods. You should also be careful in this situation that the residential part of the property is entirely separate as this is a complex case we’d advise you get in touch with us so that we can determine how best to go about this.

What can you do to get tenants out if you don't have a proper lease in place?

You would need to take possession proceedings, as you will have no right of peaceful re-entry, peaceable re-entry and CRAR can only be used if there is an active lease in place.

How can you deal with a tenant who has sublet the space without your approval? Can you forfeit the lease for this breach?

You can forfeit the lease if there is a sublet tenant in the space. The subletting falls outside the lease terms and nothing to do with the landlord. If it’s a sub-tenant that has been agreed with the landlord’s permission then that moves it to a separate place, there is a section within the regulations that deal with sub-lets and sub-tenants.

But if they are there without permission you just return to the original lease and the sub-tenant would be prevented from entering in the same way a tenant would.