Frequently asked questions
General Data Protection Regulation
Credit and Debit Cards
When did Commercial Rent Arrears Recovery replace the Laws of Distress?
Explain the new terminology under CRAR
Can a landlord take control of goods?
What is an Enforcement Notice?
Can arrears of Service Charges and Insurance be collected under CRAR?
What is meant by Taking Control of Goods?
What should a landlord do when a tenant falls into arrears?
What are the 3 stages of CRAR and the costs?
Can the Notice of Enforcement give less than 7 clear days?
PBS Debt Collection Charges
Can CRAR be used with a Sub-Tenant?
Can CRAR be used with Inclusive Rents?
Can CRAR be used with Turnover Rents?
Can a landlord allocate a payment to arrears of service charge before rent?
Can a landlord place the Enforcement Notice on the back of a rent demand?
What happens if the lease has expired?
Can CRAR be used to recover arrears of rent due from a tenant in a pub?
What of a landlord has allowed Grace periods?
Can CRAR and Forfeiture be used in the same quarter?
General Data Protection Regulation
Updates have been made in accordance with the General Data Protection Regulation (GDPR) which takes effect across the European Union on the 25 May 2018. This is changing to harmonise privacy laws across Europe and to ensure transparency rules for how companies disclose their data processes.
PBS takes data protection extremely seriously and this flows throughout the company. PBS is registered with the Information Commissioner’s Office (ICO) under registration number Z4837026 and this means that PBS is required to keep all personal data it receives secure and confidential, and to only use it where we have a legal basis to do so.
Our systems and processes are in accordance with the current Data Protection law and also comply with the new GDPR requirements which will come into effect on 25 May 2018. All staff receive regular training to ensure that they comply with the current data protection law along with the new requirements of GDPR.
PBS also owns its own purpose-built, secure CRM IT System. Each user has their own login details with a secure password.
Please also be advised that we do not share, sell, buy, trade, give away or exchange any personal information with any third parties.
Credit and Debit Cards
PBS do not accept any credit card payments. We accept debit card payments up to £5,000. Payments above £5,000 cannot be made by debit or credit card.
When did Commercial Rent Arrears Recovery replace the Laws of Distress?
On 6 April 2014 the ancient Laws of Distress, which had been in need of modernisation, were replaced by a new regime known as Commercial Rent Arrears Recovery (CRAR).
The process of change began in 2007 with the Tribunals, Courts and Enforcement Act 2007 (TCEA2007) which set out the basic details as to how CRAR would work. The general election came and all appeared to go quiet until, in July 2013 the Taking Control of Goods Regulations 2013 were published, paving the way for CRAR.
Explain the new terminology under CRAR
Bailiffs are now known as Enforcement Agents.
Distress is now known as Taking Control of Goods.
Can a landlord take control of goods?
No, only an enforcement agent can take control of goods.
Under the old laws a landlord could distrain on his tenant himself, without enlisting the services of a bailiff. Under CRAR a landlord cannot take control and must instruct a certificated enforcement agent to do so on his behalf.
What has changed?
There are two big changes:
1. The enforcement notice giving the tenant 7 days to pay.
The biggest and most fundamental change under CRAR is the 7 day Enforcement Notice.
The old laws of distress enabled a landlord or managing agent to distrain for rent as soon as the rent was overdue, eg the day after quarter day, with no warning to the tenant.
Under CRAR tenants must be given 7 clear days in which to pay, in the form of the enforcement notice, which PBS send by post and where possible email.
2. Service charges and insurance cannot be collected using CRAR
Only pure rent, VAT and interest can be collected under CRAR.
Under the old laws a landlord could distrain for service charges and insurance, but under CRAR these charges do not qualify and must be collected as a debt.
What is meant by ‘Taking control of goods’?
There are three ways by which an Enforcement Agent can Take Control of Goods under CRAR for commercial rent arrears.
- The agent can secure the goods on the premises on which he or she finds them.
- The agent can remove them and secure them elsewhere.
- The agent can enter into a controlled goods agreement with the tenant.
A controlled goods agreement replaces the old walking possession agreement. It is an agreement under which the tenant is permitted to retain custody of the goods, but acknowledges that the Enforcement Agent has taken control of them and agrees not to remove or dispose of them, nor permit anyone else to, until the debt is paid.
What should a landlord do when a tenant falls into arrears?
Landlords and managing agents now need to act more swiftly than ever before, to avoid being caught out by the 7 clear days. During this period the tenant has a golden opportunity to avoid CRAR by removing their goods, or vacating the premises before the enforcement agent’s visit.
As soon as a tenant is in arrears, whether or not the landlord thinks they will pay after a few days, they should enlist the services of PBS immediately and instruct us to send the 7 day notice in order to start the clock ticking.
Delay could cost a landlord dearly.
What are the three stages of CRAR and the costs?
1. Compliance stage – sending the 7 day enforcement notice– no charge to clients
Upon issuing the enforcement notice, the tenant is charged a compliance stage fee of £75.00 only (VAT is payable by the landlord, if VAT registered. By the tenant if the landlord is not VAT registered). This provides the tenant with 7 days to arrange payment without any further charges being incurred.
2. Enforcement stage – Taking Control of Goods – no charge to clients
If a tenant fails to pay within the 7 day period, on the 8th day PBS is able to proceed to the next stage of enforcement.
PBS will send an enforcement agent to collect payment in full, take control of the tenant’s goods or if necessary, move directly to the third stage of enforcement.
The costs set out by the Taking Control of Goods Regulations for this second stage of enforcement are as follows:
- For arrears of £1,500 and under – £235.
- For arrears over £1,500 – £235 plus 7.5% of the arrears outstanding minus the first £1,500.
- As with stage one, the VAT on these fees will be invoiced to the landlord, if they are VAT registered, and is recoverable as input tax.
- Should the tenant refuse to pay or enter into an acceptable payment plan, the enforcement agent has the right to move immediately to the sales stage for which the tenant will incur further costs (see Sales Stage below)
3. Sales (Disposal) stage – removing and selling goods
If the tenant fails to pay or defaults on a payment arrangement, the next stage is to remove and arrange for the sale of the goods.
The costs to the tenant for this stage of enforcement are as follow:
- Disposal stage fee of £110 plus 7.5% of the sum outstanding minus the first £1,500.
- The VAT on these fees will be invoiced to the landlord (if applicabale) as with stages 1 and 2.
- The auctioneer’s commission and out of pocket expenses
- Storage costs
- Reasonable disbursements incurred in respect of advertising the sale
The threat of removal is often the landlord’s most effective weapon and a landlord should not be afraid to take advantage. However it is worth considering the likely outcome of a sale before embarking on a removal, as any shortfall will be payable by the landlord.
Can the Notice of Enforcement give less than 7 clear days?
In exceptional circumstances a landlord can make application to the Court for an order giving their tenant less than 7 days’ notice, where they have good reason to believe that the tenant will dispose of goods in order to avoid those goods being taken into control by an Enforcement Agent. In practise this happens very rarely, but it is worth a landlord having the knowledge should it be required at some future date.
PBS Debt Collection Charges
There is no charge to clients for this service, even if we are unable to recover the debt or our fee. Our fee is payable by the debtor.
We charge a fee of £50 + VAT, (£30 recovery fee + £20 admin fee) which is added to the debt and collected direct from the debtor, in accordance with Late Payment legislation.
For combined instructions, the service is also free to the debtor, providing they make payment in full within 7 days.
Can CRAR be used with a Sub-Tenant?
Yes CRAR can be exercised on sub tenant, provided the landlord has first served a Section 81 notice and provided that notice has expired.
A Notice of Enforcement cannot be sent immediately the rent falls into arrears. Before this can happen a section 81 notice has to be validly served, requiring the sub-tenant to pay the rent which it owes directly to the landlord rather than the intermediate tenant. This notice is referred to as a “Section 81 notice”.
The Tribunals, Courts, and Enforcement Act 2007 (“2007 Act”), Section 81 states that the notice should:
(a) be in writing and dated;
(b) be signed by the superior landlord and contain the landlord’s name, reference and contact details and the date of the notice;
(c) contain the amount of rent the superior landlord has the right to recover from the immediate tenant by CRAR;
(d) contain a confirmation that while the arrears remain, the sub-tenant must pay its rent directly to the superior landlord rather than the immediate tenant until the notified amount has been paid or the notice has been replaced or withdrawn;
(e) contain a confirmation that the landlord can withdraw the notice in accordance with Paragraph 55 of the ‘Taking Control of Goods Regulations 2013’ (“the Regulations”)
The notice must be served on the sub-tenant using the method prescribed under Regulation 8(1) of the Regulations. A section 81 notice takes effect 14 clear days after service of the notice.
Can CRAR be used with Inclusive Rents?
An inclusive rent will often include an element in relation to rates, council tax, services, repairs, maintenance, insurance or other ancillary matters under the terms of the lease. If these items are included within the inclusive rent then they cannot be recovered under CRAR.
Where a landlord has an inclusive rent they must identify the amount payable for the use and occupation of the property in order to be able to exercise CRAR.
Can CRAR be used with Turnover Rents?
Similarly with regard to a turnover rent, although in most leases requiring payment of a turnover rent, the tenant will be paying a separate amount in relation to service charge etc. The landlord may therefore take the view that the whole of a turnover rent is attributable to the use and occupation of the property.
Can a landlord allocate a payment to arrears of service charge before rent?
If the tenant pays monies to the landlord but does not specifically identify them as being payable in relation to the rent, then the landlord is free to allocate those monies as they see fit.
Accordingly, a landlord could allocate the monies to arrears of service charges, where the tenant may have intended them to be allocated to rent.
The tenant may challenge this.
Can a landlord place the Enforcement Notice on the back of a rent demand?
Under CRAR only an enforcement agent can serve the enforcement notice on behalf of the landlord, therefore a landlord cannot add the notice to a rent demand.
Furthermore the landlord cannot instruct an Enforcement Agent to serve the notice until the rent is in arrears, meaning a landlord is unable to set out the wording in relation to an Enforcement Notice on the back of a rent demand.
What happens if the lease has expired?
This is dealt with in section 79 of the 2007 Act. For the purpose of section 79, the lease ends when the tenant ceases to be entitled to possession of the demised premises under the lease, together with any continuation of it by operation of any enactment or of a rule of law. So if the tenant is holding over under the Landlord & Tenant Act 1954, the landlord can still exercise CRAR.
Otherwise CRAR ceases to be exercisable when the lease ends, subject to the exceptions set out in section 79 (4) which include the following:
(a) The lease did not end by forfeiture.
(b) Not more than 6 months has passed since the day when it ended.
(c) The rent was due from the person who was the tenant at the end of the lease.
(d) That person remains in possession of any part of the demised premises.
(e) Any new lease under which that person remains in possession is a lease of commercial premises.
(f) The person who was the landlord at the end of the lease remains entitled to the immediate reversion.
Can CRAR be used to recover arrears of rent due from a tenant in a pub?
There are difficulties in using CRAR to recover arrears of rent due in relation to a pub if part of the demised premises is let as a dwelling.
If part of the demised premises is let under a lease as a dwelling, let under an inferior lease as a dwelling or occupied as a dwelling, then it is not treated as a lease of commercial premises and the landlord cannot use CRAR.
So if premises demised by a lease of a pub include a dwelling, then the landlord cannot use CRAR.
However, if those parts of the premises which could be used as a dwelling, are either empty or being used for something else (eg storage) or if the lease does not permit their use as a dwelling, then CRAR is still exercisable.
What of a landlord has allowed Grace periods?
The majority of leases require that the rent is paid on a particular date, either the quarter day or the first day of the month.
If historically the landlord has allowed the tenant to pay the rent late, then steps should be taken to make sure that the tenant knows that if the rent is not paid on the due date, according to the terms of the lease, then the landlord will be authorising an enforcement agent to serve notice on the tenant requiring that the rent is paid.
Can CRAR and Forfeiture be used in the same quarter?
There are two different scenarios here, firstly where both CRAR and forfeiture are both being used for rent, and secondly where CRAR is being used for rent and forfeiture for service charges and insurance
1. Can we take control for RENT and forfeit for RENT in the same quarter?
The answer is no as these are mutually exclusive means of recovery. However, where the enforcement agent attends after the Notice of Enforcement has been sent and seven days have passed with no contact, and finds the premises vacant, we can then formally withdraw from the CRAR process and proceed to forfeiture.
2. Can we take control for RENT, and forfeit for SERVICE CHARGES or INSURANCE in the same quarter?
The answer is yes, depending on the wording of the lease and again only if done in the correct sequence. A landlord wanting to use both remedies needs to take control first, as there must be an ongoing landlord/tenant relationship for CRAR to be used.
In circumstances where the tenant cannot or will not make payment, and the goods are of little value, meaning that removal is not commercially viable, the landlord can proceed with forfeiture for unpaid service charges and/or insurance. It must be stressed that this action can only be taken if the wording in the lease permits.