The requirements are as follows:
Minimum rent arrears period
There has to be a minimum amount of arrears before CRAR can be exercised, known as “net unpaid rent” equal to seven days rent. This is a significant departure from the distress for rent process, which permitted a landlord to attend for seizure immediately upon the rent falling into arrears under the lease.
What can be recovered?
Unlike distress, CRAR only applies to principal rent, VAT and interest. It does not apply to service charge, insurance premiums, rates or other payments reserved as rent. If there is an inclusive rent (including service charge etc.), CRAR will only be available for that part of the rent “reasonably attributable” to possession and use of the premises. Landlords may need to look at alternative routes to recover these charges, e.g. obtaining judgment and enforcing using enforcement agents. This is, of course, more costly and time-consuming.
Which leases can CRAR be used for?
For the CRAR procedure to be applied, there must be a current and written lease in place, and it has to be solely for commercial use (not “mixed-use” premises). This includes a lease where the premises are let wholly or partly as a dwelling. However, CRAR can be used, potentially, where the letting under the sub-lease or occupation as a dwelling is in breach of lease terms.
Notice period prior to taking control of goods
CRAR requires at least seven clear days prior notice, excluding Sundays, Bank Holidays, Good Friday and Christmas Day, to be given to the tenant. This notice is known as a “notice of enforcement”. This is one of the major disadvantages of CRAR, in that the surprise element found in distress is removed. The theory is that the notice period gives the tenant the opportunity to pay the arrears to prevent the “enforcement agent” (the equivalent of the bailiff under distress) from turning up. There are detailed requirements for the form of the notice (where mistakes can occur, potentially invalidating the notice), and the notice must be given by the enforcement agent or its office, not the landlord’s solicitor. CRAR can be exercised between 6am and 9pm on any day of the week, or outside of those hours if the premises are open for trade.