- The economic position has affected landlord services in a number of ways over the past few years. Tenants have gone bust, they are now charged rates for un-occupied buildings and the insolvency laws in relation to properties are complicated are hard to keep up with.
Revive Business Recovery have teamed together with solicitors to provide a service to landlords to assist them where they have a tenant who is (or they think is about to) go into a formal insolvency proceeding.
Questions a landlord will have in these situations are:-
- Can I recover any monies for outstanding rents, future rents, service and management charges and dilapidations?
- Can I distrain or sue for these monies?
- Should I forfeit the lease?
- Can the tenant disclaim the lease?
- Should I make a commercial deal with the tenant?
- Should I allow the lease to be assigned to a third party?
- Can I pursue the guarantor of the lease?
The actions that a landlord can and can’t take will depend on the type of insolvency. They are quite complex and I have detailed a few key points below:-
The company in administration benefits from a moratorium which prevents the landlord taking action against the company without leave of Court. If the administrator continues to occupy the building, then the rent will be an expense of the administration. Recent case law dictates that the Administrator should pay the landlord for the duration of time that he make use of the preoperty. Prior to this (24 February 2014), it would only be an expense if it is due to be paid. For example, if the company goes into administration on the 2nd of the month and the building is occupied until 18th of the month, but the rent is not invoiced or due until the 28th then they will not have to pay. However if they are in occupation on 28th they will have the full quarters rent to pay even if they are only in the building for a few days.
An administrator cannot disclaim the lease but may put the company into liquidation to facilitate this.
Whilst in administration, the administrator may ask for a surrender of the lease, but it will depend on the administrator as to whether they would be willing to pay anything towards the legal costs of doing this.
Landlords can generally not distrain or forfeit a lease once the liquidation has commenced, i.e. a winding up petition has been presented. In a CVL, a creditor’s voluntary liquidation the proposed liquidator may apply for a stay of proceedings.
The liquidator can disclaim the lease.
The landlord can serve a notice to elect, giving the liquidator 28 days to disclaim or lose their powers in this respect if they do nothing.
Company Voluntary Arrangment ‘CVA’
The company may wish to retain occupancy in the property, but may have historic debt. The historic debt would become CVA debt if the CVA is accepted and will be paid in accordance with the CVA proposal. If the company is not wishing to stay in occupation, they may negotiate with the landlord to forfeit the lease and for the landlord to have a claim in the CVA (or against a guarantor).
No action can be taken against a company which is proposing a CVA if it has filed for a moratorium.
A landlord can distrain, but for a maximum of 6 month’s rent before the bankruptcy order is made. Any goods or proceeds will stand charged to preferential debts if distress is levied fewer than 3 months before the bankruptcy order.
Proceedings cannot be commenced after the bankruptcy order.
The trustee in bankruptcy can disclaim the lease.
The landlord can serve a notice to elect, giving the trustee 28 days to disclaim.
Pursuing the Guarantors
No insolvency procedure will prevent the pursual of the guarantor for any monies outstanding – unless the guarantor is subject to a procedure personally.
The landlord services team consists of an insolvency practitioner and a solicitor who are experienced in this matter. We are both very commercial and advise on the best course of action for the landlord to take and carry out any necessary negotiations to get the best outcome possible.
If you are a landlord and require free initial confidential advice in this matter, please contact us on 01302 554925 or firstname.lastname@example.org