A word of caution: retail and commercial rent arrears
When dealing with rent arrears, a landlord’s available options include forfeiture (a common clause allowing the landlord to terminate the lease) and the Commercial Rent Arrears Recovery (CRAR) procedure.
Forfeiture allows landlords to terminate the lease where their tenant is in breach of their obligations (i.e. the obligation to pay rent). If the right to forfeit arises, this can be lost if the landlord is aware of the breach but acts in a way that unequivocally treats the lease as continuing. Forfeiture is put into effect either by the service of court proceedings or by peaceable re-entry (i.e. taking possession and changing the locks).
CRAR was established in April 2014 and, provided the procedure is followed correctly, it allows a landlord of commercial premises to take control of a tenant’s goods with a view to selling them to recover payment of the arrears.
A recent High Court decision (Thirunavukkrasu v Brar, 2018) has proven interesting to both landlords and occupiers of commercial premises as it relates to an issue concerning enforcement where arrears have accrued.
In this case, the tenant paid rent by quarterly instalments under a 21 year lease. The lease stated that the landlord was entitled to forfeit where rent was unpaid 21 days after it fell due. The quarterly rent due on 25 December 2015 wasn’t paid in full. This meant that the landlord had the right to forfeit by 15 January 2016.
At the start of February 2016, enforcement agents exercised CRAR in relation to the tenant’s goods. However on 12 February, the landlord then effected forfeiture and re-entered the premises.
The tenant claimed that the forfeiture was unlawful as, in exercising CRAR, the landlord acknowledged the continued existence of the lease after the right to forfeit had arisen and therefore waived the right to forfeit.
In the County Court, the judge found that CRAR indeed waived the right and therefore the forfeiture was unlawful. The High Court came to the same conclusion.
This illustrates that it is important to seek advice on your options and the most effective strategy. Timing is also critical – if CRAR had been exercised within the 21 day period after the rent fell due, right to forfeit would not have been lost.
If you are a charity which acts as a landlord or tenant and needs advice about CRAR, forfeiture or any other aspect of property litigation then contact me directly by emailing jonathan.bouchta@GAsolicitors.com or call 01752 203500.