Arrears Recovery Flashcards
1
Q
Talk me through the process of a tenant not paying rent and how you would remedy this
A
- Contact the tenant to ascertain why payment has not been made
- Inspect the unit to see if tenant is still in occupation
- Request full audited and managed accounts before recommendation
- Options as follows;
- Draw down on rent deposit
- Pursue Guarantor (serve S17 L&T Covenants Act 1995)
- Statutory Demand
- Surrender/Forfeiture
- CRAR
- Payment Plan
2
Q
What if there is a Guarantor in place?
A
- Pursue guarantor under section 17 of the L&T covenants act 1995 within 6 months
- If guarantor clears arrears , they have a right to take over the overriding lease
- Replaced Privity of Contract
3
Q
What is CRAR?
A
- Commercial Rent Arrears Recovery
- Replaced ancient law of distress for rent
- Introduced in 2014
- Available to commercial Landlords to recover rent (plus VAT and interest)
- No minimum amount of arrears required
4
Q
What are CRAR timelines?
A
- 7 days unpaid rent
- 7 days notice
- Enforcement Agent visits
- 7 days before sale of any seized goods
5
Q
What goods cannot be seized under CRAR?
A
- Perishable goods
- Tools of the trade below the value of £1,350
- Any goods proved to belong to a third party
6
Q
What are tenants’ rights under CRAR?
A
- A commercial tenant does have the right to delay the enforcement action once they receive this notice. Do this by asking a court to either; grant a delay of execution; or set aside the enforcement notice.
- Where a commercial tenant faces the CRAR process, right to enter into a controlled goods agreement. Allows them to pay the rent arrears over a period of time. If they negotiate this, their goods must remain.
7
Q
What is a Statutory Demand?
A
- A preliminary step to pursuing bankruptcy/winding up procedures
- Advisable only when there is NO dispute about the level of arrear
- Can be seen to be and AGGRESSIVE Tactic
- Tenant has 21 days to pay the arrears
- Used for debts in excess of £750
8
Q
What is the Statutory demand process?
A
- Notice served and T has 21 days to pay or propose plan
- After this time, LL can present winding up petition to Court
9
Q
What is a surrender and when would it be used?
A
- Where L&T agrees to release the tenant from its obligations
- Does not have to be consideration - can be a nil premium
- Normally only done when LL is confident of reletting or wants to redevelop
- I.e. If another tenant, with a better covenant, is interested, offering a higher rent etc. a surrender may be best - it would be done on a mutual basis so surrender and new lease is done simultaneously, not to put the client at risk.
10
Q
What is a forfeiture and when would it be used?
A
- Aggressive tactic to take back possession of the property
- Check to make sure there is a forfeiture clause in the lease
- Rent must have been properly demanded or received
- Lease would be forfeited by the landlord entering the premises peaceably
- Tenant has the right to apply to the court for relief from forfeiture and this can be delayed by 6 months
- FORFEITURE FOR NON-PAYMENT OF RENT IS WALK IN POSSESSION (lease usually gives 21 days to pay rent before proceedings can commence)
- FORFEITURE FOR BREACH OF LEASE/REPAIRING OBLIGATION IS TO SERVE A SECTION 146 LoP 1925 NOTICE AND TENANT GETS 6 MONTHS.
11
Q
What are tenants rights under forfeiture?
A
- Tenant has the right to apply for relief from forfeiture
- Can only apply to Court as they are only one that can grant it
- If they grant it, lease is restored as though forfeiture never happened
12
Q
How can LL right to forfeit be waived?
A
- Demanding rent that is due in advance - implies LL is still treating lease as effective
- Accepting rent after the landlord becomes aware of a breach or Negotiations can also have the effect of waiving the right to forfeit where those negotiations relate to the breach
- If LL agrees payment plan with T
- If CRAR is exercised
- If S25 notice is served under LL & T Act 1954
13
Q
How can lease be terminated by forfeiture?
A
- Landlord can peacefully re-enter and change locks
- Court proceedings can commence to recover possession
14
Q
Why is it important to look at management accounts as well as audited accounts?
A
- The audited accounts might be a year or so out of date, because you submit these 9 months after year end
- Management account shows how business is doing on monthly or quarterly basis
15
Q
Two fundamental principles of rent collection?
A
- Accuracy of information provided
- Timing of when demands are sent out / rent is collected by
