Problems of Insolvent Landlords

Posted: 13th April 2011

Retail to letIt is not only tenants that go broke: increasingly, overstretched landlords are becoming insolvent.

If you are a commercial tenant coming up for a rent review, it makes sense to do some investigation into your landlord’s finances and to make sure that you protect your position if necessary.
If you have paid a rent deposit and it is not legally separate from the landlord’s other assets, it may be lost if the landlord becomes insolvent. Check your lease. It may be possible to persuade your landlord to refund the deposit or agree to vary the lease to allow the deposit to be protected.
If the landlord fails to comply with its covenants it is possible that the breach may be sufficiently serious to allow you to repudiate the lease.
However, one of the most common problems arises where the insolvent landlord is itself a tenant and defaults on its covenants with the head landlord. If this results in the forfeiture of the landlord’s lease, this could lead to the loss of the right to occupy the premises.
If you have concerns about what your position would be in the even of the insolvency of your landlord, we can advise you and assist in any necessary negotiations.