Frequently-Asked-Question-Collect-My-Debt

Frequently asked questions

When was the laws of distress replaced with the Commercial Rent Arrears Recovery (CRAR)?

 

 

 

 

6th April 2014 the Tribunals, Courts and Enforcement Act 2007 (TCEA 2007) came into force, Commercial Rent Arrears Recovery (CRAR) is part of TCEA 2007

Can bailiffs still be instructed to collect commercial rent arrears?

In short the answer is yes, however the correct terminology for a certificated bailiff is now certificated enforcement agent.

Under the old regulations certificated bailiffs levied distress. Is this still done under Commercial Rent Arrears Recovery (CRAR)?

No, levy distress is now replaced in the Tribunals, Courts and Enforcement Act 2007 (TCEA 2007). The new procedure is ‘called Taking Control of Goods’

Are landlords able to take control of goods themselves?

No, certificated enforcement agents only may take control of goods. This instruction procedure is commenced when you complete our Warrant of Control. Under the old laws of distress, landlords would have been able to have distrained themselves without the need of instructing a certificated bailiff.

After completing the Warrant of Control, can the certificated enforcement agent attend the premises immediately to collect outstanding rent?

No, there has to be 7 clear days’ notice issued to the tenant first prior to any attendance taking place. The notice can be hand delivered, emailed or posted to the tenants demised premises and/or registered office.

The old distress for rent laws are now replaced with Commercial Rent Arrears Recovery (CRAR). This allows the landlord or managing agent the opportunity to distrain on goods for rent arrears. We as the Enforcement Agent then have to give the tenant a 7 clear days’ notice in writing now known as the Enforcement Notice.

So how might a landlord benefit from a certificated enforcement agent taking control of goods?

The certificated enforcement agent, regardless of meeting with the tenant or not, may take control of the goods on site, therefore creating a secured area.

  • Payment in full might then be made to satisfy the debt and costs, immediately releasing the goods back to the tenant or,
  • The certificated enforcement agent may enter into a controlled goods agreement with consent from the landlord/managing agent.

Finally

  • The certificated enforcement agent could remove the goods, securing them off site if he/ she feels that the goods are at risk of interference by the tenant after the agent has left the premises or where there is no acceptable proposal for payment where the goods are of sufficient value to warrant a removal.

It is worth noting that under the old distress for rent laws, there was an option for the tenant to enter into a walking possession agreement with the bailiff. This allowed the tenant to retain the physical possession of the goods seized and pay the debt of by agreed payment arrangement. The new controlled goods agreement replaces the old walking possession but still provides the same level of security for the landlord whilst allowing the rent arrears to be paid off via instalments.

My tenants rent is now overdue, what should I do as a landlord/ managing agent to recover my rent arrears?

Your priority is to act quickly, don’t be lenient with your tenant and grant extra periods of time without securing your position over other possible creditors. Remember before a certificated enforcement agent can attend the premises you must have given your tenant 7 clear days to pay. The 7 clear days’ period already gives scrupulous tenants a chance to render the commercial rent arrears recovery (CRAR) useless by liquidating the company, re assigning ownership of goods or removing their goods from the demised premises. They may even abscond from the demised premises in their entirety before the certificated enforcement agent has had an opportunity to visit to demand payment.

RENT ARREARS? YES! Act today! Instruct CMD enforcement

Tribunals, Courts and Enforcement Act 2007 (TCEA 2007) and Commercial Rent Arrear Recovery (CRAR) have Statutory Charges implemented at specific stages. So what are those Statutory Charges and stages that the law makes reference to?

 

 

 

 

Compliance Stage; issuing the 7 clear day enforcement notice. It may be hand delivered, sent by post or sent electronically by email.

Cost to tenant at Compliance Stage £75.00 + VAT

Cost to client – NO CHARGE

Full payment received within 7 days to Collect My Debt, case is cancelled, monies remitted to client.

Collect My Debt offer a free of charge service to our clients when instructed under commercial rent arrears recovery (CRAR)

Usually a tenant will contact Collect My Debt within the 7 clear day period to either advise that they will make payment within the Compliance Stage or cannot make full payment, therefore requesting an arrangement to clear the arrears and costs. The statutory costs of £75.00 + VAT applied is reasonable and tenants do not object to the charge as a result of our instruction after late payment of arrears.

 

Enforcement Stage; known for Taking Control of Goods.

Should a tenant fail to pay in full or only part pay without authorised agreement after the expiry of the 7 clear day compliance stage. The account then moves to the next stage which is the Enforcement Stage. Once we are at the Enforcement Stage, only then does the landlord have an advantage over the tenant as the landlord is now in a position to authorise the certificated enforcement agent to take control of goods.

Collect My Debt always recommend that certificated enforcement agents are authorised to attend from the 8th day onwards where there are still pure rent arrears. It costs the landlord nothing for us to attend. Once on site the certificated enforcement agent will attempt to take control of goods and where this is possible no payment forthcoming we will look to remove the goods taken into control. If necessary where they can then be sold in accordance with the law to cover any outstanding arrears and costs.

The costs to tenant for exercising the enforcement stage as set out in commercial rent arrears, recovery (CRAR) is as follows

  • Pure rent arrears from £0.01 – £1500.00 -£235.00
  • Pure rent arrears of £1500.01 and above – £235.00 +7.5% of the arrears outstanding above the £1500.01

All costs are subject to the standard rate of VAT

The cost for client – no charge

CMD enforcement offer a free of charge service to its clients when instructed under commercial rent arrears recovery (CRAR)

 

Sale Stage – Referred to as removal and Sale of Goods

Once the tenant fails to pay after the taking control of goods whether that be on the day that an enforcement agent attended or upon defaulting on a pay arrangement, Collect My Debt can then remove goods to be sold at a later date to recover the rent arrears and costs.

It is worth noting that should the tenant default on a payment arrangement following on from an earlier attendance where goods were taken into control then a default notice has to be issued first. This is called “Notice of Intention to Re-Enter the Premises. It can be hand delivered, issued by email or posted. The notice gives the tenant 48 hours to resolve the arrears by way of a payment in full before any further action takes place.

Costs chargeable to tenant once sale stage is reached are as follows:

  • £110.00 Sale Stage fee. In addition, anything over £1000.00 threshold attracts a further 7.5% fee + VAT
  • Storage fees
  • Disbursement costs such as advertising the goods available for sale
  • All auctioneers out of pocket expenses and commissions. Certificated enforcement agents obtain best results when being able to use all three stages as and when necessary. Whilst threatening to remove someone’s goods for non-payment sounds harsh it delivers results, turning most refusal to pay and claims that they cannot pay situations later into full payments.

It should be noted that if after removing and selling the tenants goods, there was a shortfall in satisfying the external contractor’s fees, storage charges, disbursements or any of the auctioneer’s fees, the shortfall of those fees would then become recoverable from the landlord. If the situation ever arose where insufficient funds after a sale of goods was achieved, Collect My Debt would assist the landlord and write off the statutory sale fee making this figure zero, ensuring that our landlord would not incur a cost applied by Collect My Debt.

For this reason, Collect My Debt can categorically say that the cost to the client to instruct Collect My Debt and their certificated enforcement agents is completely free of charge when instructing us to collect commercial rent under CRAR

The only potential exposure to our clients is when the client accepts a payment direct (does not forward this payment onto the Enforcement company), therefore leaving no rent outstanding to enforce against. In these situations, the process then ceases and the instructing client becomes responsible for all fees lawfully due under the TCE 2007 regulations.

If outside contractors are instructed at the sale stage to remove/sell goods, these potential sale stage costs would be discussed in advance and approval to proceed given when/if necessary.

 

 

 

 

Can the 7 clear days given at the Notice of Enforcement stage be reduced by the landlord/ enforcement agent?

 

 

 

 

No. the Tribunals Courts & Enforcement Act 2007 (TCEA2007) clearly set out that there are to be 7 clear days plus an additional allowance of 2 days for postage should the notice be sent by post. Only after following the correct procedure can the matter then be moved to the Enforcement Stage if necessary. However, should a landlord believe that there is an exceptional circumstance that may affect the specific recovery of the said rent debt, if the 7 clear day process was followed, then an application to the Court requesting an order to reduce the 7 clear day notice period can be made. The landlord would need to satisfy the Court that giving the 7 clear days at Notice of Enforcement stage would work against the landlord. For example, the landlord may have knowledge that the tenant might remove the goods from the demise premises or dispose of the goods by selling them to another third party. If the Court deems the application for reduced days to be acceptable they would then grant it in writing by virtue of an order. This would only ever happen on rare occasions with good reason. There is also a cost payable to the Court for considering the application which is non-refundable regardless of the decision made. Although it is rare to be granted such an order allowing a reduced number of clear days at Notice of Enforcement stage, it is worth noting that as a landlord the application through the Court can be made, should the need ever arise.

Are there chargeable costs to the client or tenant, when instructing Collect My Debt to recover outstanding Service Charge & Insurance, alongside a Warrant of Control for the Commercial Rent under (CRAR)?

Service charge & insurance are recovered free of charge when instructed under a dual instruction. i.e. a Warrant of Control for the recovery of the pure Commercial Rent under (CRAR) together with a separate instruction to collect the outstanding Service Charge & Insurance.

The collection of the Service Charge & Insurance is carried out through our debt recovery arm of the business. The process of recovery starts with the issuing of a 7-day debt recovery letter to the tenant alongside the 7-day Enforcement Notice which is sent to the tenant for the collection of the outstanding pure commercial rent actioned under (CRAR). Working both matters simultaneously proves very effective as we find that in most cases we are in email, written and telephone communication with your tenant during the 7-day period, therefore reducing the need for attendances to be made to premises. However, where we have not been able to collect we may need to attend the premises, and negotiate the full payment.

The opportunity for Collect My Debt to attend the premises to discuss the outstanding Service Charge & Insurance arises if the dual instructed Warrant of Control for the same tenant falls into default.

The Statutory legal charges that are associated with the collection of the pure Commercial Rent under CRAR remain chargeable to the tenant.

Are there fees charged to the client or tenant when instructing Collect My Debt to recover Service Charge and Insurance when there has been NO Commercial Rent recovery instruction under (CRAR) issued to CMD Enforcement?

Service Charge & Insurance recovery remains a completely free of charge service to our clients.

Our completely free of charge to client and tenant collection service consists of;

  1. Administering the account.
  2. The issuing of a 7-day letter to the tenant advising them of the Service Charge & Insurance arrears.
  3. Communication with the tenant during the 7-day letter period should they contact us to discuss the matter.
  4. Telephone calls made to tenant after the expiry of the 7-day letter.
  5. All administration and monitoring of any payment arrangements.
  6. Payment of any funds from tenant can be made directly into client account if preferred.
  7. 100% of any collections received by Collect My Debt Limited are remitted directly to client within 24 hours of receipt of the payment from tenant.
  8. Weekly/ Monthly case by case progress report issued to client.

 

What is not included in the free of charge collection service that is provided;

  1. Personal doorstep recovery agent’s attendances to tenant’s premises.
  2. Face to face meetings with tenants to discuss the arrears.

Best results are obtained when instructed under a dual instruction. i.e. a Warrant of Control for the recovery of the pure Commercial Rent under (CRAR) together with a separate instruction to collect the outstanding Service Charge & Insurance.

Are there any fees charged to the client or debtor when instructing Collect My Debt to recover business to business debts which fall outside of the collection of pure Rent, Service Charge & Insurance?

Collect My Debt do not apply any up-front administration charges to our clients or debtors for case loading the debt onto our system or for the debt management/ payment arrangement of the account. Collect My Debt do not add charges to the debtor’s debt balance for the administration of their account, chase up telephone phone calls or for sending out of letters.

Collect My Debt make a small deduction from all monies successfully recovered from the debtor. The percentage of the amount we are to deduct is based upon the original debt value we are instructed to recover. These fees are very reasonable as shown below;

  • Debt value £0.01-£5,000.00 = 15% + VAT deduction on all monies successfully recovered
  • Debt value £5,000.01-£10,000.00 = 8% + VAT deduction on all monies successfully recovered
  • Debt value £10,000.01 and above = 5% + VAT deduction on all monies successfully recovered

 

What is not included in the free of charge collection service that is provided;

  1. Personal doorstep recovery agent’s attendances to tenant’s premises.
  2. Face to face meetings with tenants to discuss the arrears.

Don’t instruct solicitors to attempt to recover your outstanding debts until you have spoken to Collect My Debt. Solicitors will incur you in expensive legal costs as well as potentially lengthy Court proceedings. Download our Debt Recovery Instruction Form now and see how quickly we can recover back what is owed to you.

Collect My Debt are a very well-practised, but also ethical and sensitive debt recovery company. We pride ourselves in our ability to recover several thousands of pounds each year for our clients. Collect My Debt have a proven track record to succeed where other companies have failed.

Is CRAR allowed with a sub tenant?

Yes, CRAR is allowed on any sub tenant. Rather than serve notice direct to the tenant, when a sub-lease is in place, the landlord may serve notice direct to the sub tenant urging them to pay directly to the landlord.

In this situation there is a variance between the Notice of Enforcement. Sub tenants are allowed 14 days’ clear days to pay rather than the normal 7 days.

Under CRAR, the sub tenant is given 14 days because they may have paid their rent on time to the tenant who has failed to pass it on to the landlord on time.

Where payment is made by the sub tenant under such a notice, then the amount may be taken away from the rent that he would pay to his immediate landlord.

The landlord may exercise CRAR against the sub tenant if they fail to pay the claimed amount in full. But the landlord cannot recover the amount outstanding from the sub tenant by serving another notice from an ‘inferior tenant of the sub tenant’.

Where the sub tenant is trading whether that be at the demised premises, head office or any other trading address they have, the 14-day Notice of Enforcement can be served. However, the landlord can only take control of goods at the demised premises and not at head office or any other address under CRAR.

What about using CRAR with inclusive rents?

Where a rent is inclusive of additional aspects in relation to maintenance repairs, services, insurance or any other matters deer the lease agreement, these cannot be recovered under CRAR.

In this situation, the amount of rent payable must be easily identified for the use and occupation of the property under the instruction of CRAR.

What about the use of CRAR with turnover rent?

Likewise, in relation to turnover rent, where most turnover rents require the tenant to pay a separate amount regarding the service charge, the landlord may consider all of a turnover rent is outstanding for the occupation and use of the property.

Can a landlord decide if a payment is for arrears or service charge?

It is up to the landlord to allocate any payment as he sees fit, unless the tenant has specified what the payment is for. Likewise, a landlord may choose to allocate the payment to outstanding Service Charges where a tenant intended the payment to be used for rent, it is up to the tenant to challenge this.

Is a landlord allowed to issue an Enforcement Notice on the back of a demand for rent?

No. Only the enforcement agent is allowed to serve the notice on behalf of the landlord under CRAR. Also, the tenant must be in arrears with rent before instructing an enforcement agent to serve the notice.

Lease has expired, however the tenant is still in occupation of the premises can I take enforcement action?

The lease expires usually when the tenant has defaulted on payments and the landlord/ managing agent has exercised their right of forfeiture of lease or when the lease agreement has reached its contractual end date, with no further right of continuation to occupy the premise. Section 79 of the Tribunals, Courts & Enforcement Act 2007 (TCEA2007) covers this area in detail.

If the tenant is claiming to hold over and occupy the premise under the Landlord & Tenant Act 1954, the landlord/ managing agent may continue to use the Commercial Rent Arrears Recovery (CRAR) procedure in order to enforce and collect the rent outstanding.

CRAR cannot be used once the lease has ended, there are exceptions as detailed in section 79 of the TCEA2007, which include but not limited to:

  • The lease was not terminated by way of a forfeiture.
  • The rent recoverable is from the individual/ company who was the tenant at the time of the expiry of the lease.
  • The individual/ company are still occupying all or part of the demise.
  • A period of 6 months or longer has not been reached before the enforcement action is undertaken and the end of the lease.
  • The landlord recovering after the end of the lease is lawfully permitted to recover the earlier arrears.
  • If there is a new lease on the premises with the individual/ company, it must be a commercial lease.
I have a mixed use site consisting of Commercial & Residential. Can I recover the rent arrears through the Commercial Rent Arrears Recovery (CRAR)?

The right to use CRAR is not permitted where part of the premises is let/leased as a residential dwelling.

For example; if the demised premises were a fish and chip shop with a flat above, and both the commercial premises and the residential flat were leased as a mixed use site, there would be no right to exercise CRAR. However, if the non-commercial parts of the premise were either empty or being used as storage facilities, or where there is a clause written into the lease denying the use as a residential dwelling, then the recovery of the rent through CRAR would be possible.

If the site is mixed use with the separate lease agreement for the commercial premises and a separate tenancy for the residential premises, along with separate access to the residential, then again CRAR could be exercised for the commercial premises only. In this case Collect My Debt would resolve the recovery of the residential rent arrears by way of our debt recovery service, alongside the enforcement action being taken to recover the outstanding commercial rent.

Our lease agreement allows for Grace Periods, what effect does this have?

Most lease agreements specifically detail within them when the rent should be paid. Usually the rent will become due for payment on a quarter date or if paid monthly then the first day or another specific date of each month.

If there is a 7-14 days’ grace period granted in writing after the rent due date before any enforcement action may commence, you are bound by those terms as laid out in the agreement and the grace period must be honoured. If there have been amendments made to the lease agreement and both the landlord and tenant have agreed to waive the grace period in writing, then you will be no longer bound by any grace period.

Is it possible to exercise CRAR & Forfeiture against the same period of overdue rent, or where there is Rent, Service Charge & Insurance due for the same period?
  • Where there is only pure Rent outstanding and you wish to exercise your right to take control of the goods under CRAR, then NO you cannot affect forfeiture at the same time. If after the issuing of the Notice of Enforcement there has been no contact with the tenant, followed up by an enforcement agent attendance where it is found that the tenant has absconded, then yes we can abandon the CRAR process and move the matter to forfeiture if instructed.
  • Where there is pure Rent, Service Charge & Insurance outstanding, then YES providing the lease agreement permits the process to take place, it can be carried out. The procedure to follow would be; take control of the goods first under CRAR for the pure rent, then forfeit the premises at a later time/date when the tenant, allowing for a peaceable re-entry into the premises and the lease becoming determined, does not occupy the premises.

 

If there are any questions you may have that are not mentioned above please call us on 0800 612 5161 or email us at info@collectmydebt.co.uk and we would be only to happy to help.

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