How to Recover rent through the use of the commercial rent appears recovery regulations
On 06 April 2014 the Commercial Rent Arrears Recovery Regulations (Regulations) came into force which are governed by the Tribunals Courts Enforcement Act 2007 and the Taking control of goods regulations 2013. The Regulations are only available to landlords of written leases of commercial premises and can only be used to recover rent, VAT and interest but not for other sums such as service charge or insurance even if those sums are reserved as rent in the lease. The Common law right of distress previously available has been abolished.
To which leases do the Regulations apply?
The Regulations apply to all tenancies of commercial premises, whether the tenancy is legal or equitable (including tenancies at will). For the Regulations to apply, the tenancy must be in writing as the Regulations cannot be exercised for an unwritten tenancy.
The Regulations will not apply to a tenancy at sufferance. This is where a tenant remains in occupation of premises after its lease has expired, but the landlord has not confirmed that it is willing for the tenant to remain.
By using the Regulations Landlords will waive any right to forfeit that may have arisen. It is important, before making use of the Regulations that landlords should consider carefully whether it will matter that any right to forfeit will be lost in consequence and how they deal with any existing breaches of the lease.
What are commercial premises for the purposes of the Regulations?
The Regulations apply to leases of commercial premises only and do not apply where the property is let as a dwelling or is occupied as a dwelling.
What can be recovered under the Regulations?
Under the Regulations rent is the amount payable under the lease for the possession and use of the premises and can include any interest and VAT.
Rent does not include any sum in respect of rates, council tax, services, repairs, maintenance, insurance or other ancillary matters even if these amounts are reserved as rent in the lease.
Where a lease provides for an inclusive rent such as including in it such things as business rates or utilities, then only the proportion that is reasonably attributable to the possession and use of the premises is recoverable under the Regulations. It would be advisable for parties negotiating a lease with an inclusive rent to record how the inclusive rent has been calculated.
Conditions to be satisfied before Regulations can be exercised
In order for the Regulations to be satisfied the tenant must be in arrears of rent before any notice of enforcement is served. The amount of the arrears must equals or exceed 7 days’ worth of rent.
The above is a flavour of what is contained in the CRAR regulations, Landlords wishing to take advantage of these regulations should obtain legal advice before instructing certificated agents as there is a specific procedure to follow before formal enforcement action can be taken. Falling foul of these regulations could prove a costly exercise and therefore it is important to take proper advice.
Contact our Landlord and Tenant team, who have over 30 years of experience, if you have an enquires regarding the CRAR regulations or any other issues.