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Insolvency

Corporate Insolvency - Implications for Forfeiture/CRAR and on Rental Liability

Insolvency Type Implications for landlord’s ability to forfeit Implications for landlord’s ability to utilise CRAR Impact on rental liability
Administrative / LPA Receivership No impact – appointment of administrative receiver can even trigger right to forfeit in certain circumstances. None – can utilise CRAR. Tenant remains liable for rent and there is no statutory moratorium. Receiver does not become personally liable but cannot disclaim the lease.
Administration Not permitted without consent of the administrator or leave of the Court. Not permitted without consent of the administrator or leave of the Court. Statutory moratorium imposed on proceedings for recovery of rent, which are not to be issued without consent of the administrator or leave of the Court. Administrator cannot disclaim the lease. Arguable that rent should be paid as an expense of the administration but will depend on what steps the administrator has taken and whether they are in beneficial occupation of the property. If the rental liability is not an expense, it will be an unsecured claim in the estate.
Company Voluntary Arrangement Generally no restriction - unless a “small company” moratorium is in place (see below) in which case a landlord needs the leave of the Court – but the terms of the CVA may restrict the landlord’s right to forfeit. If a “small company” moratorium is in place then the landlord will need the leave of the Court, if not then the landlord’s rights to exercise CRAR will depend on the terms of the CVA. This will depend on the terms of the CVA.
Creditors Voluntary Liquidation No restriction but the liquidator or any creditor can apply to Court for a stay of the forfeiture proceedings. No restriction but if the CRAR began before the winding up then certain exceptions will apply. Tenant remains liable for rent which will be an unsecured claim in the estate. The Liquidator does not become personally liable and can disclaim the lease.
Compulsory Liquidation No forfeiture is permitted without the leave of the Court or consent of the liquidator. No CRAR is permitted without the leave of the Court or consent of the liquidator. Tenant remains liable for rent which will be an unsecured claim in the estate. The Liquidator does not become personally liable and can disclaim the lease.
Moratorium under the Corporate Insolvency and Governance Act 2020 No forfeiture is permitted without the leave of the Court. No CRAR is permitted without the leave of the Court but failure to pay post-moratorium debts will effectively bring the moratorium to an end. The landlord will require the leave of the Court to bring any proceedings to recover rent arrears that accrued before the start of the moratorium, but the tenant will still need to pay the rent that falls due during the period of the moratorium itself – failure to do so will effectively bring the moratorium to an end.

“Small company” = a company which meets at least 2 of the following criteria:

  • it has a turnover of not more than £10.2 million;
  • it has a balance sheet of not more than £5.1 million; and/or
  • it has not more than 50 employees.
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