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Confirmation from the Court of Appeal: Exercising CRAR will waive a right to forfeit

In an earlier blog we discussed the High Court decision in the case of Thirunavukkrasu v Brar & Brar. The High Court confirmed that taking action pursuant to the Commercial Rent Arrears Recovery regime (CRAR) would amount to a waiver of a right to forfeit. The landlords subsequently appealed to the Court of Appeal, which has handed down judgment this week.

By way of background, Thirunavukkrasu was the tenant of premises in Teddington, London and the Brars were the landlords. The rent was due quarterly on the usual quarter days and the tenant had allegedly failed to pay the December 2015 quarter’s rent. The landlords decided to exercise CRAR on 1 February 2016 and subsequently purported to exercise their right to forfeit for non-payment of rent on 12 February 2016.

Forfeiture and CRAR are two important remedies that landlords may have recourse to when faced with a tenant in arrears:

  • Forfeiture: A right of forfeiture provides a landlord with a right to bring a lease to an end early upon the default of a tenant. In the case of non-payment of rent, for which landlords often have a right to forfeit, a landlord can forfeit by peaceable re-entry without notice to the tenant. A landlord can waive a right to forfeit by unequivocally confirming the existence of the lease and communicating this confirmation to the tenant.
  • Commercial Rent Arrears Recovery regime: CRAR is a statutory regime which allows a landlord of commercial premises to recover rent arrears by taking control of a tenant’s goods at the leased premises. Importantly, CRAR requires notice to be given to the tenant 7 clear days before sending a certified enforcement agent to attend the premises.

It was previously settled by case law that a landlord levying distress (a similar process to CRAR, which was replaced by CRAR in 2014), would waive a right to forfeit. Therefore, unsurprisingly, in this case the High Court held that exercising CRAR amounted to a waiver of the right to forfeit. In the judge’s words, the “exercise of CRAR…contained an unequivocal representation that the lease was continuing”.

The Brars decided to appeal to the Court of Appeal on a number of grounds. Their primary ground was that previous authorities on distress were not binding on the Court of Appeal and that exercising CRAR was not an unequivocal act affirming the existence of the lease but, instead, a “neutral act”. The Court of Appeal rejected this analysis, considering it be “flawed on several grounds”.

One of the other grounds that the Brars sought to argue was that because they had not given the tenant notice before sending enforcement agents to the property to exercise CRAR, rendering the exercise of CRAR invalid, they had not waived the right to forfeit. The Brars argued that, in the absence of the required notice, the tenant was not aware that the landlords had purported to exercise CRAR, meaning that no unequivocal representation that the lease was continuing had been made to the tenant.

Unfortunately for the Brars the Court of Appeal considered there to be “no merit in this ground of appeal”. The Court of Appeal considered that the High Court was perfectly entitled to form the view that the tenant “knew that CRAR had been commenced by [the Brars] by the presence of the enforcement agents [at the property]”, notwithstanding the fact that no formal notice had been given to the tenant.

The Court of Appeal’s decision simply reiterates what was already understood to be the position. However, it serves as another useful reminder for landlords, when faced with a tenant in arrears, that they need to consider their options carefully before embarking upon a course of enforcement action.

Brar & Brar v Thirunavukkrasu [2019] EWCA Civ 2032