Rights of Access and Possession where Tenant Insolvent

Access to premises in tenant insolvency

A landlord’s right to access the tenant’s premises is governed by the terms of the lease. Any notice requirements must be adhered to, irrespective of any insolvency process the tenant is subject to
Before seeking access landlords should consider whether they want to immediately determine the lease to avoid losing any right to forfeit
Landlords often require access to premises of an insolvent tenant for health and safety and insurance purposes. They may also want to market the premises (without immediately taking back possession) to limit any loss
Notice requiring access for health and safety and insurance purposes can usually be made based on the landlord’s contractual rights
Landlords can use keys it is holding or request these to access the premises making it clear in either case that it is or will hold the keys to the tenant’s order and is treating the lease as continuing
The landlord can inform the tenant’s insolvency practitioner (IP) that it will change the locks and then hold the new keys to the tenant’s order if the IP does not respond
Keys must be held and used strictly for the bases set out in the lease or under any express agreement reached with the IP

Different types of tenant insolvency will commonly trigger a right to forfeit the lease subject to the precise terms of the lease
To preserve a right to forfeit while the landlord considers its options, a rent stop should be imposed immediately and no action taken to treat the lease as continuing, discussions with the tenant or the IP about the lease
If the landlord does want to pursue forfeiture, notice under section 146 Law of Property Act 1925 will need to be served unless the landlord also has an existing right to forfeit for non-payment of rent

In administration there is a moratorium on forfeiture without (a) the administrators’ consent; or (b) leave of the court
If administrators do not require the property for the purposes of the administration, it is very likely that they will grant consent
If administrators refuse consent to forfeit, the landlord can apply to court for permission
Administrators may be prepared to accept a surrender of the lease on agreed terms; this should be discussed on a without prejudice basis if forfeiture is also being pursued
A surrender can be effected by (a) formal deed; or (b) operation of law
A surrender by operation of law can be straightforward, quick and relatively cheap, subject to dealing with any outstanding charges affecting the property which the surrender could be otherwise subject to

In a compulsory liquidation, forfeiture by proceedings can only be pursued with the liquidator’s consent or permission of the court
Forfeiture can be carried out by peaceable re-entry, but may be subject to challenge
In a voluntary liquidation, the landlord can forfeit by proceedings or peaceable re-entry unless a creditor/liquidator/contributory has applied to court for an order to restrain
A liquidator can disclaim onerous contracts including a lease. Disclaimer will end the tenant company’s rights and liabilities under the lease and, if there is no other party liable, will determine the lease
The landlord will have a claim for its loss resulting from disclaimer in the liquidation
Landlords can serve notice requiring a liquidator to elect within 28 days whether or not to disclaim the lease, or otherwise lose the right to do so
The rights and liabilities of any third parties, such as guarantors, former tenants and sub-tenants are unaffected by a disclaimer
Providing a sub-tenant complies with the liabilities under the insolvent tenant’s head lease, the landlord cannot take possession, but has no direct contractual relationship with the sub-tenant
The landlord, sub-tenants and third parties with a relevant interest in the property can apply to court for a vesting order
Agreeing a surrender of the lease is also an option if the tenant is in liquidation

Forfeiture of a lease cannot be prohibited by the terms of a CVA or a Plan
However, the terms of the CVA/Plan varying the contractual terms of the lease may mean that there are no breaches of the tenant’s covenants as varied
In consideration of the compromises imposed on landlords, the CVA/Plan will grant impaired landlords an option to recover possession of the premises by serving a notice to vacate
The terms of the lease as varied by the CVA/Plan will therefore govern how (if at all) the lease may be terminated early