Tenant in liquidation

[wunwinglo]

Hi All,

I've been reading this site with great interest for a short while now; I've found most discussions helpful and invaluable. So a hearty thanks to all.

Would like to ask opinions on Liquidation / bankruptcy proceedings... If a commercial tenant is in liquidation, does the owner have right

1 - to take possession of premises from an occupying liquidator? or charge the liquidator rent (although this could be burning bridges..)

2 - Change locks to prevent the liquidator or indebted tenant removing fixtures, fittings or stock? (recall a post on this a while ago but can’t find it now)

3 - Considering the ADSL deed of lease guarantee, where does the owner generally rank in terms of creditors...

Liquidator states in their letter to me… ‘now that the company (tenant) is in liquidation you have no right to distrain on company assets, and that the liquidator does not adopt or novate the lease…' But no reference / statute / law.. is given to substantiate the liquidators order.

Appreciate any thoughts.

[CJ]

Once the liquidator steps in, they will be liable for the rent from that date onward. Having said that, from what they have written, it looks like they are not taking over the lease.

THe period up until the liquidation date, you will just be an unsecured creditor.

Once you know a tenant is in liquidation, I would meet the liquidator at the premise ASAP and agree what is yours and what is the companys as they will want to sell all they can. YOu have no right to the items that aren't yours unless you have a guarantee over them.

Not sure about the ADSL lease guarantee.

I would talk to the liquidator and then get what they say confirmed with your own accountant (or get them to recommend an insolvancy specialist who you can talk to to confirm).

[Davo36]

This is always a tricky situation. A tenant of mine put themselves into liquidation around 3 years ago. But it's different because they vacated the premises and stopped paying the rent.

What you want to do here, is get back to a situation where you have a tenant paying the rent and outgoings asap. I would immediately list it with all the good RE agents in the area so that if a good tenant is around, you can nab them.

You need to make it clear to your lessee and the liquidator that the gaining of a new tenant (whethere by assignment or via a new lease) will be at their cost. I imagine the liquidator will be keen to have the premises re-let asap because that limits their client's costs.

Do you have a personal guarantee? If so, then that is really valuable. You need to make it plain to the lessee that you will pursue them personally if need be. It may seem tough, but why should you pay for their business failure? They took on the premises, you have kept your end of the bargain and now they must keep theirs.

If they get 15 days behind in the rent (14 days + 1 overdue) then they are generally in breach of the lease. So you can end it at that point. You can change the locks and distrain for rent as far as I'm aware but you need legal advice on this. You should be talking to your lawyer now.

Otherwise, you may decide to let them continue on until you can get someone else to lease the space. You may get some more rent from the liquidators, you never know. The thing is, liquidators don't care about anything other than themselves. They will work through it like a public service administrator i.e. at a snails pace and costing the earth. They will look out for themselves firstly and foremost.

Anyway, good luck. This will almost certainly cost you a few dollars. It's just part of the business expenses you should expect as a commercial property owner. It's hard to say how it will play out, but the thing is (IMHO) to just get back to having a decent tenant in there paying the rent and expenses and in that way you will minimise the disruption to your income.

David

[Xav]

Welcome to PT wunwinglo.

I am surprised by the quote you have given from the liquidators letter, it doesn't really make sense. The right to distrain was removed by the Property Law Act 2007 so that reference is irrelevant. And the liquidator does not choose to adopt or novate the lease. It passes automatically, however the liquidator can choose to disclaim onerous property, which includes the lease.

Presumably the intention of the liquidators letter is to disclaim the lease, but you should clarify this with them. If that is the case, the liquidator is no longer liable to you for the rent but it can no longer occupy the premises. You should make sure that the property is vacated so you can attempt to re-let it.

The disclaimer of the lease by the liquidator does not absolve the liquidator for any rent arrears (just excuses them from paying going forward). You will be an unsecured creditor for those amounts.

The disclaimer of the lease does not usually end the guarantee. The guarantor(s) will therefore still be liable for any rent arrears as well as for the rental going forward, until you cancel the lease.

You have the right to cancel the lease by virtue of the tenant going into liquidation. However, you may be better off not doing so until you have a new tenant, as that will release the guarantor(s) from liability for the rent going forward.

CJ's point about making sure the liquidators do not mistakenly remove anything from the premises which is owned by you rather than the tenant is a good one.

[wunwinglo]

Many thanks for the replys, its given me some food for thought.