Commercial landlord & tenant

It is important to take legal advice on retail and commercial leases before entering them — a poorly negotiated lease can weigh on your cash flow for years. We give practical advice so that landlord or tenant alike can make an informed decision, and assist with drafting and reviewing leases, negotiating terms including rent, transfer options, duration, exit and renewal, sub-letting, and identifying suitable business insurance.

In April 2014 the landlord's ancient right to 'levy distress' — entering the premises to seize and sell a tenant's goods for unpaid rent — was abolished for commercial premises and replaced by the statutory Commercial Rent Arrears Recovery regime, under the Tribunals, Courts and Enforcement Act 2007 and the Taking Control of Goods Regulations 2013.

The power to take control of a tenant's goods still exists, but it is now tightly conditioned, and many landlords consider it a less powerful weapon than distress. The key rules to note:

• The debt must be owed under a written lease — CRAR does not apply to licences or undocumented tenancies
• Only principal rent plus VAT can be enforced — not service charges, insurance, rates or repairs, even if the lease reserves them 'as rent'
• The premises must be purely commercial — CRAR is not available for mixed-use or residential premises
• A minimum of seven days' rent must be owed before CRAR can be exercised
• The landlord must give at least seven clear days' notice of intention, served by a certificated enforcement agent — the element of surprise is gone
• Tools of the trade are exempt up to a value of £1,350
• Goods are held under a prescribed Controlled Goods Agreement, and seven clear days' notice of any sale must be given
• Exercising CRAR waives the landlord's right to forfeit the lease for the arrears enforced

Where premises are sub-let, a superior landlord can still serve notice requiring the sub-tenant to pay its rent directly to them when the intermediate tenant defaults — but under the new regime the notice only takes effect fourteen days after service, which needs careful timing where sub-lease rent days differ from the head lease.

If an enforcement agent attempts to exercise CRAR against you, ask to see their authorisation: if it does not come from your immediate landlord, they cannot proceed. Tenants can also apply to court to halt CRAR, and can claim damages where the rules are breached — while landlords can pursue tenants who obstruct agents or interfere with controlled goods. We advise both sides on their options from the outset.

• Commercial Rent Arrears Recovery (CRAR) — for landlords and tenants
• Drafting and reviewing retail and commercial leases
• Negotiating lease terms — rent, transfer options, duration, exit and renewal
• Sub-letting of premises and rent-redirection notices
• Insurance advice and identifying suitable business cover
• Dispute resolution between commercial landlords and tenants

We explain your options — and the cost, timing and consequences of each — from the outset, so you can choose the enforcement or defence strategy that is commercially right for you.