Tenant insolvency, in its differing forms, impacts on remedies available to landlords. It is important for landlords to take advice as soon as possible in order to ensure that their interests are protected.
It is important to spot a potential insolvency situation at the earliest opportunity so that the landlord can assess its options and prepare accordingly. Common indications that a tenant may be in financial difficulty include ceasing to trade, suggestions of restructuring and late or sporadic payments of rent.
There are various types of insolvency arrangement, each of which has different effects on the remedies available to landlords. Sometimes a landlord will be able to take steps in an insolvency situation to continue to recover rent or service charges and maintain the income stream. For instance, depending on the circumstances, a landlord may be able to draw from a rent deposit or pursue a guarantor, former tenant or sub-tenant.
This is an expansive topic given that it covers administration, receivership, compulsory liquidation, voluntary liquidation, individual and company voluntary arrangements, receivership and bankruptcy. Each arrangement has different consequences on the actions a landlord can take such as the ability to exercise Commercial Rent Arrears Recovery, issue court proceedings, serve a statutory demand or forfeit the lease. Sometimes a landlord will want the lease to remain in place for as long as possible to avoid liability for rates and outgoings; usually where there is no immediate prospect of finding a new tenant.
Consideration must be given to various features within each insolvency situation such as the effect of a moratorium with CVAs and administration and the effect of disclaimer with liquidation and bankruptcy.
Ultimately landlords need to understand what it means to them if their tenant finds itself in an insolvency situation. Whether your priority is to regain possession or recover arrears, we will be able to advise you of the implications of each form of insolvency and what alternatives you have from both a legal and commercial perspective.
Contact us today
Please contact either Daniel Long or Eleanor Longworth at our Bury office on 0161 761 4611 to discuss any aspect of commercial property disputes.
