CRAR and Coronavirus

Landlords and Enforcement Agents (Bailiffs) should be careful when accepting payment arrangements at compliance stage.

Background

The whole point of being able to use CRAR is that commercial landlords can use an Enforcement Agent (bailiff) to collect their rent quickly without the need to go to court.

The first stage of any taking control of goods process is the compliance stage where debtors are sent a Notice of Enforcement.

Debtors will often ring or write in during this stage and try to make arrangements. This is usually to avoid the need for a bailiff to come out and take control of their goods. This is even if this is going to be on a controlled goods agreement.

Debtors do not want the process to move to the Enforcement Stage as there are additional bailiff fees charged. It also puts them under more pressure to pay or not to miss any payments on threat of a removal.

In my opinion however this is the only way to ensure any sort of security for the landlord.

Tribunals, Courts and Enforcement Act 2007 Section 77 (4) allowed CRAR to become exercisable if there was a net minimum amount unpaid. This was later clarified as 7 days of unpaid rent (The Taking Control of Goods Regulations 2013 Regulation 52). Since the 2014 regulations came into force this 7 day rule has not created many problems as it was such a small amount being only 7 days rent.

Unintended consequence

Fast forward to 2020. The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 changed the unpaid rent figure from 7 days to 90 days.

The unintended consequences of this are now starting to become obvious.

There has always been 2 trigger points of when this minimum amount of rent due before CRAR becomes exercisable (or continues) under section 77 of the Tribunals, Courts and Enforcement Act 2007. These 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)

Consequently when a lower amount is accepted during the compliance stage that then may take the rent due to less than 90 days.

When Control of Goods has not taken place should the payment arrangement fail then under point 2 the trigger figure of 90 days rent due may not be met.

Therefore in effect the landlord may have just wavered their right to use CRAR by accepting a payment arrangement.

Example

A landlord issues an instruction for 90 days of unpaid rent on a quarterly lease at £20K.

The Enforcement Agent (on instruction from the Landlord) agrees an arrangement of £10,000 at compliance stage followed by £2,000 a week for 5 weeks.

Following the payment of £10,000 the net unpaid rent due in that quarter is now £10,000 which represents 45 days rent not 90 days.

The goods have not be taken into control at that point and the enforcement agent may now be barred from proceeding to exercise CRAR.

 

Problems with commercial tenants?

If you have problems with late paying commercial tenants then contact Quality Bailiffs.

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