Collecting Commercial Rent Arrears


Collecting commercial rent arrears using lease forfeiture

When a tenant is in rent arrears commercial lease forfeiture by peaceable re-entry is increasingly being used rather than commercial rent arrears recovery.

Rise in the use of lease forfeiture

CRAR, Commercial Rent Arrears Recovery, has significant restrictions which appear to be putting landlords off from using it for arrears collection:

  • Have to give notice of action.
  • Can not be used for the recovery of service charges and insurance charges.

Whilst lease forfeiture may be viewed as a draconian step some tenants are often playing a game withholding their insurance and service charges until after the claim form arrives. If they owe £5000 for insurance for instance then for the sake of £185 court fee this can delay payment for at least 3 to 4 weeks.

Once forfeiture is achieved the landlord is holding all the cards and the action often leads to a swift payment of outstanding rents and charges.

Mixed use properties

Neither CRAR or Lease Forfeiture is available for mixed used properties. For mixed use properties landlords have to resort to court action or issue an under the insolvency act.

This is because the use of CRAR is prohibited under section 75 of Tribunal Courts and Enforcement Act 2007 for anything other than commercial premises. Forfeiture on mixed use properties was dealt with in Pirabakaran v Patel 2006. The Court of Appeal clarified the position with regard to not being able to forfeit mixed use properties. The Court of Appeal has interpreted the ‘let as a dwelling’ to mean ‘let wholly or partly as a dwelling’, and not ‘let exclusively as a dwelling’.

So you cannot peaceably re-enter a mixed use property and a commercial landlord would need to forfeit the lease through court proceedings. To re-enter any part of the premises will be contrary to Protection from Eviction Act 1977.

We can help

Quality Bailiffs has over twenty five years of experience in the execution of warrants, especially in the commercial rent sector.

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