Landlords: take care when exercising CRAR

Global Publication October 2018

Since the abolition of distress in 2014, landlords who want to recover rent arrears by taking control of the tenant’s goods and selling them must do so through a statutory procedure known as Commercial Rent Arrears Recovery (CRAR). CRAR is more limited than distress and is only available to recover arrears of basic rent from commercial premises.

Leases of commercial premises also invariably contain an express right for the landlord to terminate the lease by forfeiture if the tenant is in breach of any of its terms, such as by not paying rent.

It is all too easy accidentally to waive the right of forfeit. If the landlord (or indeed its agents) does anything that effectively acknowledges an ongoing landlord and tenant relationship once it is aware of a breach of the lease, it will have waived its right of forfeit for that particular breach.

Thirunavukkrasu v Brar [2018] EWCH 2461 (Ch) considered for the first time whether the exercise of CRAR amounted to a waiver of the right to forfeit.

The landlord sought to recover accrued arrears of rent by means of the CRAR procedure and the landlord’s agents exercised CRAR over the tenant’s goods. The landlord also subsequently purported to forfeit the lease by re-entry. The tenants argued that the purported forfeiture of their lease was unlawful and claimed damages for trespass.

The judge held that the exercise of CRAR by the landlord contained an “unequivocal representation that the lease was continuing”, so that the right to forfeit the lease had been waived and the forfeiture was indeed unlawful.

Accidental waiver is a particular problem in the context of “once and for all” (as opposed to continuing) breaches, because if the right to forfeit in respect of such breaches is waived, it will be waived permanently. Non-payment of rent is a “once and for all” breach. However, landlords may be heartened to know that the right to forfeit may arise again if the tenant fails to pay another instalment of rent in the future.



Contacts

Head of Real Estate, London
Knowledge Of Counsel

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