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Tenant's Insolvency Notes

LPC Law Notes > Commercial Property Notes

This is an extract of our Tenant's Insolvency document, which we sell as part of our Commercial Property Notes collection written by the top tier of Cambridge And Oxilp And College Of Law students.

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Elective: Commercial Property

Commercial Property Tenant's Insolvency Protection against T's insolvency
? Forfeiture clause [Clause 7 lease] - expressly granting the LL a right to forfeit upon T's insolvency. However there are disadvantages =
o T will have no obligation to pay rent from the date of forfeiture o LL may have difficulty re-letting the premises so soon o LL may loose the right it has against 3 rd parties [e.g. T1 if lease has been assigned or guarantor] to pay the rent in the event of default.??

Rent Deposit Guarantor Upon assignment - a rent deposit / guarantor / AGA Have detailed check-ups on the financial position of tenant: Try to spot insolvency sooner rath than later by having regular checks.

What can LL claim for:

Rent in arrears LEADING UP TO the insolvency = LL must claim for these in the insolven

Rent / Service charge arising after the start of insolvency = depends on Tenant's liability: Tenant's liability upon insolvency: Insolvency
? Tenant remains liable in the following insolvency regimes:

Voluntary arrangements [if the terms provide so]


Administration where the administrator is not in occupation

Liquidation where the liquidator is not in occupation

? Guarantor remains liable also! The lease is still active so [deemed a continuing tenancy] and so Guarantor must continue to pay rent [S.178(4)(b) Insolvency Act]. Advise Guarantor to apply for vesting order [put lease in his own name].

Bankruptcy: [only applicable to individuals]

Trustee in Bankruptcy becomes liable for further rents after the start of insolvency [there h been an automatic assignment which does not require LL consent]

S.284(1) IA 1986 - between presentation of Bankruptcy's petition and property vesting in Trustee, the bankrupt cannot make any disposition of the property [e.g. assign or sublet the lease]. Performance of covenants:

Insolvency official = not personally liable to perform covenants [e.g. do repairs, observe user covenants]. He is merely an agent of the Tenant. LL has normal remedies against the Tenant.

Trustee in Bankruptcy = personally liable 1

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