The Court of Appeal has ruled that landlords who exercise their rights under the Commercial Rent Arrears Recovery (CRAR) procedure waive their right to forfeit the lease.
This means that commercial landlords whose tenants have fallen into arrears may have to decide whether they want the arrears paid or their property back.
CRAR allows commercial landlords to recover rent arrears by taking control of their tenants’ goods at their premises and selling them.
The dispute that led to this judgment involved a tenant who ran a newsagent in Teddington, Middlesex, who failed to pay his December quarterly rent, due on Christmas Day 2015.
The landlord exercised CRAR rights and on 1 February 2016 agents entered the property and took around £10,000 worth of goods to cover £8,000 of arrears. The arrears were paid on 4 February. On 12 February the landlord attempted to forfeit the lease to get its premises back.
This led to a legal dispute in which the tenant argued that, at the time of forfeiture, no rent was outstanding and the landlord’s actions to forfeit the lease were unlawful.
The dispute made its way from the County Court, through the High Court, to the Court of Appeal.
According to the ruling, the most significant argument from the landlord at the High Court was that exercising its rights under CRAR did not constitute a waiver of its right to forfeit. High Court judge Marcus Smith disagreed and ruled in favour of the tenant.
And, in a ruling handed down by a three-judge panel yesterday, the court agreed with the High Court and again found in favour of the tenant.
According to the ruling, written jointly by Sir Terrence Etherton MR, Lord Justice David Richards and Lord Justice Newey, lawyers for the landlord argued that “the exercise of CRAR in the present case, and indeed in any case, is not of itself an unequivocal act, manifesting a concluded decision to affirm the existence of the lease”.
“We reject that analysis, which is flawed on several grounds,” they wrote.
The appeal was rejected on all three grounds brought by the landlord.
Thirunavukkrasu v Brar and another [2019] EWCA Civ 2032; [2019] PLSCS 231
Court of Appeal (3 December 2019)
Timothy Cowen (instructed by Richmond and Barnes Solicitors) for the appellants Aaron Walder (instructed by York Solicitors) for the respondent
