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Problems with Insolvent Landlords

22nd August, 2011

It is not only tenants that become insolvent: increasingly, overstretched landlords are in danger of going broke as well.

If you are a commercial tenant and have a rent review coming up, it makes sense to do some research 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 to 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, should you so wish.

Another common problem 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 event of the insolvency of your landlord, we can advise you and assist in any necessary negotiations.

Contact Simon Ellis for advice on all property law matters at [email protected]

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