Insolvent Commercial Tenant UK: Landlord Options

Overview

Tenant insolvency is not a single legal event. It is a label covering several different procedures, each with its own rules about what creditors, including landlords, can and cannot do. The most common procedures affecting commercial tenants in England and Wales are company voluntary arrangements (CVAs), administration, compulsory or voluntary liquidation, and, for individual tenants or partnerships, bankruptcy or an individual voluntary arrangement (IVA).

Restructuring plans under Part 26A of the Companies Act 2006 have also become more common since 2020. Each regime can restrict the landlord's ability to forfeit the lease, issue proceedings, instruct enforcement agents or petition for winding up. Some impose an automatic moratorium the moment the procedure begins.

Others require the landlord to apply for permission from the court or the office-holder before taking action. Alongside these statutory restrictions, a landlord's position also depends on the lease itself, any rent deposit deed, guarantees given by parent companies or former tenants, and the existence of any subtenants. Understanding which of these rights survive insolvency is the starting point for any sensible strategy.

Key steps

1. Confirm exactly what has happened. Ask the tenant, check Companies House filings and search the Individual Insolvency Register or Gazette before doing anything else. The procedure the tenant is in, and the date it started, decides which remedies are available and whether a moratorium is in force. Acting on assumptions here is a common and expensive mistake.
2. Review the lease, deposit deed and any guarantees. Pull the paperwork and identify every source of security the landlord holds. Look for rent deposit provisions, authorised guarantee agreements from former tenants, parent company guarantees, personal guarantees from directors and any rights to divert rent from subtenants under section 81 of the Tribunals, Courts and Enforcement Act 2007.
3. Decide whether to preserve or end the lease. A performing lease with a solvent guarantor may be worth keeping alive. A lease with no realistic prospect of payment and a tenant stripped of value may be worth forfeiting so the property can be re-let. This decision drives everything that follows, including whether to accept rent, which can waive the right to forfeit.
4. Check whether a moratorium or consent requirement applies. Administration and the Part A1 moratorium both block forfeiture, enforcement and proceedings without court permission or the office-holder's consent. CVAs and restructuring plans can compromise rent arrears if landlords are bound by the vote. Liquidation restricts some steps, particularly after a winding-up order.
5. Take action on the routes still open. Draw down on the rent deposit if the deed permits it, serve demand on guarantees, divert subtenant rent where appropriate and consider marketing the property. Keep detailed records of arrears, communications and any attempts to mitigate loss. If forfeiture is available and commercially sensible, instruct agents carefully to avoid inadvertent waiver.

Common questions