People walking across a suspension bridge

What should a landlord consider when encountering insolvent tenants?

Steven Edwards - Partner, Vince Green - Head of Recovery Solutions, Joe Longhurst - Manager, Recovery Solutions
People walking across a suspension bridge

Landlords have mechanisms available to them to recover debts and minimise losses, including:

  • forfeiting a lease
  • issuing debt proceedings 
  • serving a statutory demand
  • exercising commercial rent arrears recovery. 

These can be restricted in effectiveness, particularly in the case of a tenant’s insolvency.

If a tenant enters into an insolvency process there may be restrictions on the recovery actions available to a landlord. Each insolvency event will have different restrictions, advantages and disadvantages affecting the landlord's position. It is therefore important for a landlord to understand the differences between each.

Company Voluntary Arrangement (CVA)

CVAs have been used by multi-site corporate tenants to propose legally binding arrangements to settle rent arrears and/or to reduce future rent liabilities, or simply to vacate premises. 

CVA proposals of this type can often prioritise landlords of prime sites. The CVA can also restrict the enforcement remedies available to a landlord and provide new provisions relating to the rights of landlords and payment of rent.

While a landlord may be required to write off an amount of their debt, if the CVA is successful, they will receive the benefit of distributions declared in the CVA for at least part of their arrears. Additionally, a tenant will typically be under an obligation to pay ongoing rent for the period of the CVA for the premises being occupied. 

Landlords who receive a CVA proposal are well advised to engage with the tenant as early as possible and consider the commerciality of their decisions when weighed against that proposed in a CVA.  A landlord may also benefit from professional advice so that their options are fully understood.


When a company enters into administration a landlord has no right of forfeiture for non-payment of rent nor are they able to enforce a claim without leave of the court or the consent of the administrators.  

An administrator is not required to pay rent if a property is not used by them. In that scenario, a landlord may wish to accept a surrender of the lease which will avoid further rent arrears accruing. The landlord is then able to find a new tenant for the property.  If an administrator continues to use the property they are required to pay rent as an administration expense (in priority to other creditors) for each day that the company occupies or uses the property. The administrator is not personally liable, but the rent is payable in priority to the administrator's fees. A landlord will rank as an unsecured creditor for any pre-administration rent arrears and dilapidations, less any rent deposit held.

There are times, as part of a business sale, that an administrator will seek an assignment of a lease. A landlord may be in a stronger position when negotiating terms with a new tenant as part of that process. It is worthy of note that commercially a landlord may prefer to negotiate rather than have a vacant unit attracting the liability of business rates.

Creditors Voluntary Liquidation (CVL)

A CVL is an insolvent winding up procedure initiated by directors/shareholders which normally means that a tenant will cease trading. 

In a CVL a landlord is able to continue actions to recover unpaid rent and may forfeit a lease. However, recovery proceedings by a landlord may be stayed by the court and a liquidator can apply to the court to prevent proceedings progressing. Additionally, a landlord cannot exercise commercial rent arrears recovery, which allows landlords of commercial premises to recover rent arrears by taking control of a tenant's goods and selling them.  

If a tenant remains in occupation during the liquidation period, it can remain liable for the lease obligations as an expense of the liquidation but a liquidator has the ability to disclaim the lease if it is deemed to be ‘onerous’. As a result, the property is simply handed back to the landlord and the liability for rates, utilities and running costs will again be a landlord’s responsibility. Upon a lease being declaimed, the liquidator will no longer be required to pay rent and the landlord has no right to claim for future rent from the date of the disclaimer. Not only is the leasehold contract disclaimed, the leasehold interest itself is extinguished.

A landlord can claim against an insolvent company for losses or damage arising from the disclaimer which would include the loss of future rent. The landlord has a duty to mitigate their claim for the sum of rent, rates and repairs achieved or ought to have been achieved for re-letting the property on the open market for the remainder of the term.

Compulsory Liquidation

An insolvent company can be forced into compulsory liquidation following the presentation of a winding up petition to the court. Similarly to a CVL, a liquidator can disclaim an onerous lease. A landlord is then able to make an unsecured claim against the insolvent tenant.

The main difference between the two types of liquidation is that a landlord will need the court’s permission to enforce their right of forfeiture and to take other forms of enforcement.

Schemes of arrangement/restructuring plans

These are both compromise arrangements between a company and its creditors, approved by the court, which allow for a reorganisation or restructure of debts. 

In a scheme of arrangement each class of creditor must approve the scheme. A restructuring plan (introduced by Part 26A of the Corporate Insolvency and Governance Act 2020) can be approved, even should one of the classes of creditor vote against it, even landlords. This is known as a ‘cross class cram down’ mechanism.

In any insolvency proceeding, a landlord can submit a claim for the sum owed to the insolvency practitioner appointed. In common with other unsecured creditors, a landlord will have rights to a pro rata dividend declared by the appointed insolvency practitioner, but that can result in very little being recovered.

Once a company has entered a formal insolvency process there are restrictions on the action’s landlords can consider, so landlords should consider seeking professional advice at the first notice of any such procedure.

How Crowe can help

At Crowe, we have a team of experienced and licensed insolvency practitioners who can advise you on the best course of action, depending on your business’s circumstances. Please get in touch with either Steven Edwards or Vince Green who are licensed insolvency practitioners, or your usual Crowe contact.


HMRC has ramped up its efforts to tackle tax non-compliance in recent years, increasing nudge letters targeted at Real Estate.
Nudge letters issued to landlords with deposits in the Tenancy Deposit Scheme that don't match rental profits declared on 2020/21 returns.
HMRC has ramped up its efforts to tackle tax non-compliance in recent years, increasing nudge letters targeted at Real Estate.
Nudge letters issued to landlords with deposits in the Tenancy Deposit Scheme that don't match rental profits declared on 2020/21 returns.

Contact us

Steven Edwards
Steven Edwards
Partner, Recovery Solutions
Vince Green
Vince Green
Head of Recovery Solutions