Amended CRAR Regulations

The Regulations originally changing the use of CRAR came into force on 24 April 2020. The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 provided three key changes (although only the first is really headline grabbing):

• An increase of the threshold before CRAR can be exercised in the first place – from 7 days’ rent arrears to 90 days, for enforcement notices given between 25 April and 30 June 2020;
• An extension, in certain circumstances, to the date by which an enforcement agent must have taken control of goods if the notice of enforcement is not to lapse; and
• An extension of the 2 year enforcement certificate that enforcement agents must hold in order to act in that capacity (again, in certain circumstances).

There have been a number of further amendments to the Regulations as the effects of the pandemic have continued. The resulting thresholds before CRAR can be exercised have now been increased as follows:

• 276 days’ rent arrears for enforcement notices given before 24 December 2020 (or where goods are taken control of for the first time on or before 24 December 2020)
• 366 days’ rent arrears for enforcement notices served between  25 December 2020 – 24 March 2021
• 457 days’ rent arrears for enforcement notices served between 25 March 2021 – 23 June 2021
• 554 days’ rent arrears for enforcement notices served from 24 June 2021

As with all COVID-19 related legislation, there is the potential that the restrictions could be further extended in due course. When introducing the changes in March 2021, the Government noted that they would:

“…not only facilitate the faster recovery of businesses, but also provide additional protection and flexibility in managing their finances. This is in line with measures already taken by the Government to protect business tenancies from forfeiture and to encourage creditors to show forbearance to businesses affected by coronavirus.”

Nonetheless, the Government also emphasised that:

“The restriction on the use of CRAR and associated measures are not a rent holiday and tenants remain liable for payment of any rent arrears.”

The Government recognised that the changes to CRAR – together with the other restrictions on landlords’ remedies – are having an impact on the landlords of commercial premises and “causing some financial distress”.  However, it noted that the measures are temporary and continued to hope that the Code of Practice published in June 2020 will “help to mitigate pressures on landlords”, together with increased flexibility from lenders and the wider Government packages of support to UK businesses.

Of course, the Code of Practice is due to expire in June 2021 and the Government has indicated that it will shortly be launching “a call for evidence on commercial rents to help monitor the overall progress of negotiations between tenants and landlords”. It is understood that the “call for evidence” will also set out potential steps that Government could take after 30 June, ranging from a phased withdrawal of current protections to legislative options targeted at those businesses most impacted by COVID-19. Watch this space for further details...

For more information, please contact Emma Humphreys or Richard Flenley or your usual Charles Russell Speechlys contact.