Waiver of forfeiture by using CRAR

In Brar & Brar v Thirunavukkrasu [2019] EWCA Civ 2032, the Court of Appeal has confirmed that the exercise of the Commercial Rent Arrears Recovery (CRAR) procedure will operate to waive a subsisting right to forfeit a lease.

In this case, the tenant had fallen into arrears with the rent. In January 2016, the landlord instructed enforcement agents to seek recovery of the arrears by use of the CRAR procedure. On 1 February, the agents exercised CRAR over the tenant’s goods at the premises for rent arrears and costs totalling £10,533.20, which sum was paid by electronic transfer on 4 February. However, arrears of £3,000 were still outstanding because a cheque that the tenant had sent in late January had been dishonoured. On 12 February the landlord re-entered the premises by way of forfeiture on account of the outstanding rent. The tenant argued that this was an unlawful re-entry because, by using the CRAR procedure, the landlord had waived its right to forfeit for the unpaid rent. The lower courts agreed, as did the Court of Appeal. Waiver of forfeiture, although a common law principle, had not been altered by the introduction of a statutory scheme for distraining for rent through the CRAR procedure. Use of that procedure amounted to an unequivocal act by the landlord confirming its election to continue with the lease.

The Court of Appeal dismissed an argument by the landlord based on section 210 of the Common Law Procedure Act 1852. Under section 210, when “one half year's rent shall be in arrear” and “there were not sufficient goods on the premises to recover the arrears” by use of the CRAR procedure, the landlord may, instead of re-entering premises, bring proceedings for ejectment of the tenant and for the recovery of possession of the demised premises. The landlord argued that, although it had not made use of section 210, the fact that it could have done so (there being more than 6 months’ rent unpaid) indicated that waiver did not apply in these circumstances. The Court of Appeal did not agree. Had the landlord’s argument been correct, there could never have been a waiver when more than six months’ rent was in arrear. What the landlord was suggesting was that section 210 had abolished waiver of forfeiture by distress (or, today, the exercise of CRAR) in all cases where six months or more of rent was in arrear. This was not the case. Section 210 simply operated to give the landlord a defence, in an action for possession based on rent arrears, to a claim by the tenant that the landlord had waived its right to forfeit by distraining (or, today, using CRAR). 

The system of Commercial Rent Arrears Recovery (CRAR) under sections 71 to 87 of the Tribunals, Courts and Enforcement Act 2007, and Schedule 12 of that Act, came into force on April 6, 2014. The provisions of the 2007 Act abolished the common law self-help remedy of distress for arrears of rent and replaced it with a codified CRAR procedure which allows landlords of commercial premises to instruct enforcement agents to collect arrears of rent under a lease. This decision reminds us that, under the old law of distress, the relationship of landlord and tenant had to exist when the rent accrued due and when the distress was levied. Accordingly, levying distress was an acknowledgement by the landlord that the lease was still continuing and was therefore an election by the landlord not to forfeit. The same approach applies under CRAR. CRAR is exercised on behalf of the person who is “entitled to the immediate reversion” in the property comprised in the lease and its use is therefore a sufficient recognition that the lease is still continuing. It is an election by the landlord not to use its right of termination by forfeiture. The landlord argued that CRAR differed from distress in that it remained possible to use the procedure after the lease had ended. The Court of Appeal did not see that as a significant departure. In general, CRAR does cease to be available once the lease has ended. However, for rent accruing due before the end of the lease, CRAR can be used for up to six months after the end of the lease but only where the lease did not end by forfeiture and the tenant has remained in possession of the property. This would allow a landlord to utilise CRAR, for example, where the tenant is renewing a lease and is still in possession.

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