CRAR Beware of Trojan Horses

Should Landlords and Enforcement Agents (Bailiffs) be very aware of accepting arrangements in compliance stage ?

Background

The whole point of being able to use CRAR is that commercial landlords can use an Enforcement Agent (bailiff) without the need to go to court to collect their rent quickly.

The first stage of any taking control of goods process is the compliance stage where debtors are sent a Notice of Enforcement.

Debtors will often ring or write in during this stage and try to make arrangements. This is usually to avoid the need for a bailiff to come out and take control of their goods. This is even if this is going to be on a controlled goods agreement. This is because there are extra bailiff fees charged (Enforcement Stage) and it puts them under more pressure to pay or not to miss any payments on threat of a removal. In my opinion however this is the only way to ensure any sort of security for the landlord.

Tribunals, Courts and Enforcement Act 2007 Section 77 (4) allowed CRAR to become exercisable if there was a net minimum amount unpaid. This was later clarified as 7 days of unpaid rent (The Taking Control of Goods Regulations 2013 Regulation 52).

Since 2014 regulations came into force this 7 day rule has not created many problems as it was such a small amount.

Fast forward to 2020. We then have The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020. This changed that figure from 7 days to 90 days.

Unintended consequences

The unintended consequences of this are now starting to become obvious for those that look.

There has always been 2 trigger points of where this minimum amount of rent due before CRAR becomes exercisable (or continues) under section 77 of Tribunals, Courts and Enforcement Act 2007 .

These trigger points are:

1/ At the time when notice of enforcement is given (compliance stage )

2/ At the first time that goods are taken control of after that notice. (Enforcement Stage)

So if a lower amount is accepted during compliance that then takes this rent due to less than 90 days.

Control of Goods has not taken place so If the arrangement fails then under point 2 the trigger figure of 90 days rent due may not be met.

Therefore in effect the landlord may have just wavered their right to use CRAR by accepting a Trojan Horse.

Case Study

A landlord issues an instruction for 90 days of unpaid rent on a quarterly lease at ￡20K then the Enforcement Agent or landlords agrees an arrangement of ￡10K at compliance stage and ￡2000 a week . The net unpaid rent due in that quarter is now ￡10K which represents 45 days rent not 90 days .

The goods have not be taken into control at that point and the enforcement agent may now be barred from proceeding to exercise CRAR .