My Business Is Struggling With Commercial Rent Arrears

October 16, 2019 / FAQs

If your company is in financial distress and you’re struggling to pay the rent, your landlord can take action against you to recover rent arrears.

According to Commercial Rent Arrears Recovery (CRAR) you landlord has the right to seize your goods with 7 days notice if you’re unable to meet your lease.

Within these 7 days, a financial plan must be negotiated that suits both parties.

If it’s not possible to come to a solution that both the landlord and the business are happy with, this time period must be used to explore restructuring options with a licensed insolvency practitioner.

What is Commercial Rent Arrears Recovery?

Commercial Rent Arrears Recovery (CRAR) is a legislative measure which replaced the law of distress on 6th April 2014.

The measure is in place for times when commercial property falls into arrears and the landlord is able to take control of the tenant’s goods to sell them on and recover the money owed through rent.

In order for CRAR to be applicable, the premises must be used for commercial use only rather than residential use or a combination of the two.

The following conditions must also be met:

  • The lease must be in writing
  • CRAR cannot be used after the lease has ended due to forfeiture
  • Only rent payments, VAT and interest can be collected

CRAR cannot be used to recover service charges, insurance premiums, business rates or other charges.

What are my rights as a director?

The guidelines stipulate that the landlord must give business tenants notice before employing a bailiff to enter the commercial premises.

7 days notice must be given before the landlord visits the premises and a further 7 days notice must also be given prior to the seizure of assets.

The 7 days notice excludes Sundays and bank holidays.

Despite what the dramatic debt-collection TV shows may have you believe, bailiffs must enter properties in a peaceful manner. They can only visit the premises between 9am and 6pm. The only exception is if the business operates outside of traditional office hours.

Which items can be seized by bailiffs?

Although bailiffs can seize a diverse selection of items, there are some exemptions.

The following cannot be taken by bailiffs:

  • Equipment used to carry out your job, business or education such as telephones, vehicles and computers
  • Items you’re using at the time of the bailiff’s visit
  • Items belonging to someone else

Is it possible to keep my assets without paying in full?

It’s usually possible to arrange a repayment plan with the landlord of your premises. This is formally known as a controlled goods agreement and by making these regular payments, you’ll be able to keep the items on your premises and continue to use them.

If you break the controlled goods agreement, you’re legally entitled to 2 days notice for the bailiff to return to your premises and take the goods.

What happens to items taken by bailiffs?

When a bailiff removes goods from commercial premises, these items are usually sold at auction to recover the unpaid rent.

In the 7 days prior to the goods being sold, you should receive a summary of the items’ value, details of the auction location and details of the auction’s time.

If your company is in financial distress and you’re unable to pay your commercial rent, please get in touch with the team at Clarke Bell today. We can advice on the most suitable solution to your company debt problems.