Forfeiture vs CRAR for Commercial Rent Arrears: Choosing the Right Remedy and Managing Relief Applications

Rent arrears are a significant problem for commercial landlords. Remedies include court action, forfeiture, and Commercial Rent Arrears Recovery (CRAR). 

CRAR is a statutory regime introduced by the Tribunals, Courts and Enforcement Act 2007, It is specifically designed to make recovering rent arrears straightforward for commercial landlords, avoiding the requirement to go to court. 

This article covers forfeiture vs CRAR, considering the pros and cons of both, and how to make a strategic decision.

We act for commercial landlords across England and Wales on rent arrears disputes, including CRAR enforcement, forfeiture proceedings, and debt recovery. If you’re facing a defaulting tenant and want clear advice on your options, contact our specialist litigation solicitors. We work nationally and are happy to help.

How CRAR Works in Practice

CRAR allows a commercial landlord to recover qualifying rent arrears from commercial tenants by instructing a certified enforcement agent to take control of the tenant’s goods and, if necessary, sell them. CRAR can only be used for commercial premises, not mixed-use commercial and residential units.

This is a self-help remedy but the court has the power to intervene if the tenant applies for an order.

CRAR is a prescribed statutory regime. This dictates service of a compliant notice of enforcement, defined time limits, and restrictions on which goods may be taken.

To use CRAR, you must have a written lease, the premises must qualify as commercial premises, and the rent must be due and payable before the notice of enforcement is given. The net unpaid rent must be equivalent to at least seven days rent when the notice of enforcement is given and immediately before the enforcement agent takes control of the tenant’s goods.

Under CRAR, you can only recover principal rent, interest on that rent, and VAT. CRAR cannot be used to recover service charge, insurance rent or other sums. Certified enforcement agents (previously called bailiffs) must carry out the process to ensure compliance with regulations.

The landlord’s enforcement agent must give a notice of enforcement to the tenant unless the court orders otherwise. The notice must contain the prescribed information. Tenants must be given fourteen clear days to pay or negotiate terms. If the rent remains unpaid after fourteen days, the enforcement agent may take control of the tenant’s goods and, if necessary, sell them to cover the debt.

Certified enforcement agents can only take control of goods that belong to the tenant, and which are physically located within the leased premises. They cannot take goods that are in use at the time of seizure, items belonging to employees, or essential ‘tools of trade’.

CRAR is quick and effective and usually doesn’t require a court order. Because it’s a statutory process, if you follow the rules, then there is little room for challenge or dispute by tenants. 

CRAR is often a less adversarial option to take compared to forfeiture for commercial rent arrears because it leaves the lease in place.

When Forfeiture Becomes the Better Option

Forfeiture has two principal benefits. The first is that if the process is successful, the landlord will regain possession of the property and can re-let it.

This may be the best option if the tenant is likely to default again or has committed other breaches of the lease provisions. In a buoyant property market, re-letting could be quick and easy.

Additionally, successful forfeiture doesn’t close the door on pursuing rent arrears either using CRAR or a debt claim through the courts if the tenant has left the property.

The other key advantage of forfeiture is that it’s a strategically powerful tool, exerting pressure on a tenant to meet its rent arrears because of the prospect of repossession.

Whilst a powerful tool, forfeiture is also easy to get wrong, with strict rules and procedures and pitfalls including inadvertent waiver of the right to forfeit.

Deciding whether forfeiture is right for your situation, and executing it without inadvertently losing that right, requires specialist support from the moment your tenant defaults. We act for commercial landlords in forfeiture proceedings across England and Wales and can give you an honest assessment of your position before you commit to a course of action.

Relief from Forfeiture and Its Impact on Strategy

Relief from forfeiture is a lifeline to commercial tenants. It’s a discretionary power allowing courts in England and Wales to effectively reinstate the lease as if it had never ended.

Relief from forfeiture isn’t something a landlord and tenant can agree between themselves; only a court can grant relief from forfeiture.

In the case of rent arrears, the court commonly grants relief if the tenant clears the outstanding sum, any interest, and the landlord’s reasonable expenses. A tenant should also be able to demonstrate secure payment going forward.

In rent arrears cases, the court’s aim is to restore the lease, not to hand the landlord back the property. That distinction matters strategically.

Forfeiture has strict procedural rules, and the biggest trap is inadvertent waiver. You lose the right to forfeit the moment you take any action that a court could treat as accepting the lease is still running; for example, accepting a rent payment after the breach, writing to the tenant about the property, or even serving a CRAR notice can all constitute waiver of that particular default.

Forfeiture may also be a commercially unattractive option if the tenant has a sound business in all other respects, and the landlord is keen to preserve their reputation.

Get specialist advice as soon as your tenant defaults. Early instruction is the most effective way to preserve your options and avoid inadvertent waiver.

Using CRAR Effectively Without Undermining Other Remedies

Serving a CRAR notice treats the lease as still in force, which means it acts as a waiver of your right to forfeit for that specific breach. A landlord should not use CRAR and forfeiture for the same default at the same time. However, using CRAR for one default does not prevent forfeiture for a later breach or later rent arrears.

Whether to use CRAR for unpaid rent, pursue a money claim in the courts, or opt for forfeiture, and in which order, is a strategic decision which depends on the individual circumstances, the lease provisions, and your commercial objectives. We act for commercial landlords across England and Wales, helping them build a remedies strategy from the moment a tenant defaults, whether that means CRAR, forfeiture, a money claim, or a combination of approaches. 

Risks Landlords Should Be Aware Of

Neither CRAR nor forfeiture guarantees full recovery. The strength of either remedy depends on your specific circumstances, the lease terms, and the tenant’s financial position. Before considering either option, you should be aware of the following risks:

• CRAR waives your right to forfeit for that breach; forfeiture may be a better strategic option.
• The value of the goods that certified enforcement agents recover may not be equivalent to the amount of rent owed. 
• Tenants may move or hide assets to avoid seizure by enforcement agents.
• A tenant could be uncooperative and there may be delays in accessing the premises.
• Breaching the CRAR regulations may make the enforcement invalid, meaning a tenant could have a damages claim against you for loss.

Frequently Asked Questions

Can CRAR Be Used at the Same Time as Forfeiture?

No, not for the same default. CRAR treats the lease as continuing, whereas forfeiture brings the lease to an end. Serving a CRAR notice is likely to waive the right to forfeit for the arrears relied on in that notice. If recovering the outstanding rent while keeping the lease in place is the goal, CRAR may be the better option. If regaining possession is more important, forfeiture may be the stronger tool. Either way, take specialist advice before acting.

When Should a Landlord Use CRAR Instead of Forfeiture?

Of the two options, CRAR is quicker and more straightforward as a mechanism to encourage tenants to settle their rent arrears. It also avoids the complex processes and court orders which forfeiture demands. However, forfeiture of commercial premises may be effected by peaceable re-entry where lawful and appropriate, or by possession proceedings. CRAR may be less adversarial because it leaves the lease in place.

Does CRAR Allow Recovery of All Arrears and Costs?

Ultimately, the assets available cap your recovery. If the goods seized don’t cover the debt, the shortfall remains outstanding. CRAR only allows recovery of the principal rent, VAT on that rent, and interest which is determined either by the lease or by statute (statutory interest). Other sums owed such as service charges or insurance, must be pursued as a debt claim through the courts. 

Speak to Helix Law About Commercial Rent Arrears Recovery

CRAR and forfeiture each give commercial landlords a different type of leverage, and using one can affect your ability to use the other. The right choice depends on your commercial objectives, the terms of your lease, and your tenant’s financial position. Acting early gives you the most options.

We are a team of specialist litigation solicitors providing practical and strategic advice on all aspects of commercial property disputes ranging from contractual wording to recovering rent arrears.

We offer cost-effective solutions tailored to suit your commercial objectives, clearly defining all the options, and protecting your position with correct and compliant implementation. We put our own fees on the line for qualifying cases. No Win No Fee funding is available on commercial property disputes typically valued over £10,000 with strong prospects of success, subject to case assessment.

If you’re unsure of what steps to take regarding your commercial tenant in rent arrears, speak to our specialist solicitors. Our property litigation team has decades of experience dealing with similar situations, and we are happy to assist you.