Q: Can the landlord still collect rent during administration?<\/h3>\n
A: Yes, but it depends on the situation. If the property is actively used during administration, the administrator must pay rent as an administration expense. If the property isn’t used, the landlord may need to claim unpaid rent as an unsecured creditor, often receiving only a fraction of the owed amount.<\/p>\n
Q: What happens if the lease is disclaimed?<\/h3>\n
A: If the administrator disclaims the lease, it effectively ends the tenant’s interest in the property. However, the landlord can:<\/p>\n
- \n
- Repossess the property.<\/li>\n
- Claim for any unpaid rent and damages as an unsecured creditor.<\/li>\n
- Pursue any guarantors or former tenants if lease conditions allow.<\/li>\n<\/ul>\n
Q: What if the tenant goes into liquidation instead of administration?<\/h3>\n
A: Liquidation signals the end of the business, with assets sold to repay creditors. The lease can be disclaimed by the liquidator if the property isn’t needed. As with administration, landlords become unsecured creditors for unpaid rent but can still seek payment from guarantors or former tenants if such provisions exist.<\/p>\n
Q: Can a landlord forfeit the lease if a tenant is in administration?<\/h3>\n
A: Usually, a landlord needs court permission to forfeit the lease during administration due to a legal moratorium protecting the business. However, if the tenant goes into liquidation and the lease is disclaimed, the landlord can repossess the property without restrictions.<\/p>\n
Q: What should a landlord do if their tenant goes into administration or liquidation?<\/h3>\n
A: Landlords should:<\/p>\n
- \n
- Contact the administrator or liquidator to understand intentions regarding the lease.<\/li>\n
- Review lease agreements for clauses related to insolvency, guarantees, and rent deposits.<\/li>\n
- Seek professional legal advice to navigate claims and recovery options.<\/li>\n
- Prepare to remarket or repurpose the property if lease termination is likely.<\/li>\n<\/ol>\n
Understanding the processes involved can help landlords act swiftly to protect their interests when a tenant faces insolvency.<\/p>\n
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\nDidn’t see it coming?<\/h2>\n
The provisions of the Insolvency Act 1986 means that a landlord cannot instruct bailiffs to visit the property and seize goods to cover the debts while a tenant is in administration. Understandably this creates a big problem for landlords, particularly if they didn\u2019t see it coming.<\/p>\n
Fortunately, there may be one way to recover the rent owing and that is to approach the administrator and ask if they will pay the rent and include it as part of the administration process. There is a better chance of success going down this route if the administrator is occupying the property at the time.<\/p>\n
It has to be said, however, that you will be relying on the administrator to allocate the payment during what amounts to a grace period for the business from being pursued by creditors.<\/p>\n