Landlord forfeiture and CRAR when commercial tenants become insolvent

1. Peaceable re-entry

For commercial property, a landlord may re-enter without court order where the lease contains a forfeiture clause and the tenant is in breach. Service of a s.146 Law of Property Act 1925 notice is required for non-rent breaches but not for rent arrears. Peaceable re-entry must be undertaken without violence and without breaching the peace — Criminal Law Act 1977 s.6 makes the use or threat of violence to secure entry a criminal offence.

2. Forfeiture by court proceedings

A claim for possession in the County or High Court, typically used where the tenant is sufficiently established that peaceable re-entry is impractical. The tenant has statutory rights to seek relief from forfeiture on payment of arrears and costs.

CRAR replaced distress for rent in 2014 and is the landlord's statutory self-help remedy for rent arrears, governed by the TCEA 2007 (s.72 onwards) and the Taking Control of Goods Regulations 2013. Key features:

• ›Commercial premises only — no residential component.
• ›Principal rent only — not service charges, insurance, or other sums unless reserved as rent.
• ›At least 7 days net unpaid rent must be due before CRAR can be exercised.
• ›Requires 7 clear days notice of enforcement to the tenant before goods can be taken.
• ›Third-party goods on the premises may not be taken.

CRAR is exercised by certificated enforcement agents, not the landlord personally. The agents enter the premises, identify goods, take control by notice or removal, and sell at auction after a further notice period.

Paragraph 43 of Schedule B1 IA 1986 imposes a wide moratorium on enforcement against a company in administration:

• ›No landlord may forfeit by peaceable re-entry without administrator consent or court permission.
• ›No CRAR or other enforcement step without the same consent or permission.
• ›No legal process commenced or continued without consent or permission.

Court applies the Atlantic Computer principles (Re Atlantic Computer Systems plc [1992] Ch 505) in deciding whether to grant permission. Permission is not normally granted where it would impede the purposes of the administration; permission may be granted where the landlord would suffer loss disproportionate to any advantage to the administration.

Where the administrator is using the premises for the benefit of the administration, the rent for the period of occupation is typically treated as an administration expense under the Lundy Granite principle (Re Lundy Granite Co (1871) LR 6 Ch App 462; Goldacre (Offices) Ltd v Nortel Networks UK Ltd [2009] EWHC 3389 (Ch)).

During a Part A1 moratorium, forfeiture by peaceable re-entry requires court permission. The moratorium also restricts CRAR and legal proceedings for possession. The carve-outs are narrow — in practice, landlords cannot enforce against a tenant in a Part A1 moratorium without going to court.

Rent for the moratorium period must be paid by the tenant as a moratorium debt, and ranks with super-priority in any subsequent insolvency. A significant comfort for landlords compared to the pre-CIGA position, when administration moratorium rent could rank as an ordinary unsecured claim.

In compulsory liquidation, no action or proceeding may be commenced or continued against the company without leave of court (s.130(2) IA 1986). Forfeiture by peaceable re-entry has generally been held to fall outside this restriction — there is no 'action or proceeding' involved. CRAR also generally falls outside, but counsel should be taken on contested cases.

In voluntary liquidation, no equivalent statutory restriction applies. Landlords may forfeit and exercise CRAR subject only to the underlying lease and statutory framework.

• ›The administration moratorium is a powerful temporary shield, but creates ongoing rent liability as an administration expense if the premises are used.
• ›Entry into administration purely to defer forfeiture is increasingly viewed sceptically when permission applications are made — the administrator must have a credible purpose beyond the moratorium itself.
• ›Part A1 moratorium gives short-term breathing space but rent must continue to be paid in cash for the moratorium period.
• ›Where the lease is genuinely uneconomic, an administrator may disclaim onerous property (s.178 IA 1986 in liquidation; analogous powers in administration). Terminates future obligations but does not avoid arrears or accrued damages.

• ›Quick action — peaceable re-entry before any insolvency procedure crystallises avoids the moratorium issue altogether (subject to no Notice of Intention having been filed).
• ›Once a Notice of Intention is filed, the interim moratorium under paragraph 44 of Schedule B1 attaches immediately for 10 business days.
• ›Engaging with the administrator constructively often produces a better outcome than confrontation — administrators routinely need landlord cooperation for orderly trade-out or sale.
• ›Where premises are being used for the administration, push for rent as administration expense paid currently. Lundy Granite / Goldacre supports this position.
• ›Sub-tenants, guarantors, and former tenants under AGAs / privity remain liable independently of the insolvent tenant.

For RoT recovery, see Retention of title claims. For HCEO/bailiff enforcement, see HCEO and bailiff powers. For the NOI route, see Notice of Intention to appoint administrators. For the breathing-space tool, see Part A1 Moratorium.