Typically, if you’re looking to recover debts you need to go through the court process first. When you want to recover outstanding commercial rent, though, this can be enforced by bailiffs, without the need to go to court.
Commercial rent arrears can soon build up if you don’t act quickly. If you’re a commercial landlord and your tenant is not paying rent there are some fast and effective solutions.
Commercial Rent Arrears Recovery (CRAR)
One of the easiest and cheapest ways to pursue a commercial tenant for non-payment of rent is through the CRAR process. This can be conducted via a bailiff company and there is no cost to the landlord.
There are a number of factors that determine whether you can use CRAR for your property.
It must be a completely commercial property, with no residential element to the lease. Even if the residential section is not currently used as such; if it is mentioned in the lease then CRAR cannot be utilised.
There must be a written lease in place; not just a verbal contract. In order to collect the unpaid commercial rent, it needs to be at least seven days overdue.
Only the rent can be collected through the CRAR process. It doesn’t apply to any other elements, such as service charges, business rates, legal fees etc. If these are also outstanding, a County Court Judgement can be obtained and then enforced if the debtor doesn’t pay.
How to recover outstanding commercial rent through CRAR
In order to collect the unpaid rent using CRAR, an Enforcement Agent (bailiff) will serve a formal Notice of Enforcement on the tenant. This provides them with seven clear days to pay their arrears before enforcement action can be taken.
On expiration of the notice, the enforcement agent will visit the property to collect the commercial rent arrears. If the tenant cannot make a full payment or agree on a payment plan, the agent can take control of goods at the site. This is not usually necessary and often just the presence of the bailiff is enough for the tenant to pay the debt in full.
However, where necessary, the bailiff will make a full inventory of goods and can either remove them, secure them at the property or use a Controlled Goods Agreement. The Controlled Goods Agreements allows the items to be left at the site with the understanding they can be removed at a later date if the arrears remain unpaid.
On occasions, a commercial landlord might decide to try the CRAR process first. If this is unsuccessful in recovering the unpaid rent, they can then proceed to a commercial lease forfeit. This may mean you need to look at other routes to collect the remaining debt.
Other options to recover unpaid commercial rent
CRAR is the most used method for collecting commercial rent. However, if this isn’t suitable or isn’t effective, there are other routes you can take. This could include pursuing a guarantor for the rent arrears.
There is also the option of taking the tenant to court, by making a claim against them for the rent arrears. This is a much more costly and drawn out process than CRAR and still doesn’t guarantee that the debt will be paid in full. Where the tenant has few assets, they may agree to a reduced payment plan or it may be necessary to employ the services of a bailiff to enforce the judgement.
Where your commercial tenant is not paying rent, it’s important to look at all the options available. Consider which is most suitable for your circumstances and contact The Bailiff Company to discuss how we can help.