A landlord’s guide to dealing with an insolvent commercial tenant


A landlord’s guide to dealing with an insolvent commercial tenant

If one of your commercial tenants is insolvent, it can quickly have a knock-on effect to your own business. You may have suffered rent arrears and/or unpaid maintenance fees in the time leading up to their insolvency, but being insolvent doesn’t necessarily mean they’ll close down.

Depending on the circumstances, a tenant may have options that allow them to continue trading and operating from your premises. They might be able to formally renegotiate their debts as a whole, for example, or secure emergency funding to carry on in business.

So what should you do if a commercial tenant enters insolvency, and can you mitigate your own risks at this time?

Landlord enforcement and coronavirus

Before we look at forfeiting a commercial lease and/or repossessing the property, the Coronavirus Act, 2020, brought in restrictions on commercial landlords’ ability to enforce unpaid debts.

Currently in place until 31st March 2021, you cannot forfeit your commercial lease, serve a petition, or issue a statutory demand, if your tenant has had to cease trading due to the effects of coronavirus.

But what would forfeiting your lease involve, and how should you proceed?

Forfeiting the lease

There’s typically a clause in a commercial lease that allows for forfeiture in the event of a tenant entering insolvency. This means you can regain possession of the property, and the lease is terminated.

It’s important to seek professional advice before forfeiting a lease, however, as it may prevent you from claiming for unpaid rent in the future, or for damages if your tenant has failed to fulfil other obligations under the lease.

If your tenant enters company administration or compulsory liquidation, you won’t be able to forfeit the lease without seeking permission from the office-holder or the courts.

Should you repossess the property?

Depending on the circumstances, repossession may not be advisable, as if the company enters administration you could still receive some rent from the administrator. Furthermore, the administrator may want to sell the insolvent business as a going concern, in which case a new commercial tenant could move in.



Written by: on 4th October 2020

Share:

About the Author

Get In Touch

Do you have a query, or a property to sell? Complete this form and an expert will be in touch promptly.

Here at Pugh we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. Unless indicated in the box above, we will not use your information for marketing purposes. See PRIVACY POLICY.

Sending Enquiry...
Your enquiry has been sent. One of our experts will be in touch shortly.
Pugh & Company Ltd, 340 Deansgate, Manchester, M3 4LY

Mon-Fri: 09:00am - 5:30pm

Saturday: Closed

Sunday: Closed

Pugh Head Office