The recent High Court decision in Thirunavukkrasu v Brar & Brar  EWHC 2461 (Ch)
confirmed that a landlord’s exercise of the Commercial Rent Arrears Recovery (CRAR) scheme amounted to an indirect acknowledgment of the continuing landlord and tenant relationship, and therefore also constituted a waiver of the landlord’s right to forfeit the tenant’s lease.
In 2013, the tenant entered into a 21 year lease of commercial premises in Middlesex, with rent to be paid on a quarterly basis. The lease contained a standard provision whereby the lease could be forfeited if rent remained unpaid for 21 days beyond the due date, and during the course of the lease, the tenant fell into arrears. Accordingly, in January 2016 the landlord instructed enforcement agents to recover the arrears, and they subsequently exercised CRAR over the tenant’s goods for a total sum of £10,533.20 inclusive of fees. Later, as a result of a dishonoured cheque for £3,000, the landlord claimed that the sum recovered was £3,000 short of the total amount due, and on 12 February re-entered the premises seeking to forfeit the lease.
The judge held that the re-entry was unlawful. Whilst it was confirmed that the CRAR regime was in no way a direct replacement for the old common law remedy of distress, it nevertheless operated in a similar way in these circumstances. Distress could only be levied whilst the relationship between landlord and tenant, and therefore the tenancy itself, was subsisting. The exercise of that remedy was deemed an ‘unequivocal recognition’ of such relationship. The same applies to the CRAR regime, whereby its use is a clear recognition of the continuing landlord and tenant relationship. The fact that CRAR remains available following the termination of a lease was deemed immaterial.
This decision is a welcome one for property lawyers due to its clarification of the position of the CRAR regime in relation to forfeiture. Whilst it is clear that CRAR is not the general successor to the old law of distress, in practical terms the position for the landlord in cases such as these remains unchanged, in that the exercise of CRAR also waives the right to forfeit a lease.
This case provides a warning to landlords that leases should be drafted to include a clause permitting the exercise of CRAR whilst preserving the right to forfeit, in instances where the tenant has breached the terms of the lease. If this were not to be possible, it remains a balancing act for the landlord to ensure they do not waive their right to forfeit the lease by virtue of exercising CRAR. For further information contact Natalie Minott on 01223 532717 or click here
to email Natalie.