Siobhan Jones outlines the perils of landlord insolvency for tenants
There are indications that the number of landlord insolvencies may increase as the recession evolves and lenders resolve to take action. While landlords are now fairly well versed in the options available to them when a tenant is in default, tenants would be well advised to understand how an insolvent landlord may diminish the value and viability of their own interest in the lease.
Initial considerations
A tenant will need to assess how the landlord’s insolvency will impact on its rights, liabilities and occupation under the lease. The following matters should be considered at the outset:
Payment of rent
Rent will continue to fall due under the lease regardless of the status of the landlord. The tenant will however need to ascertain to whom the rent should be paid. Where the landlord has entered one of the insolvency regimes, rent will be payable either to the liquidator, the administrator or the company voluntary arrangement (CVA) supervisor (depending on the terms of the CVA).
Where the landlord itself holds a superior lease and has defaulted
