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High court insolvency decisions are a bonus 1

United Kingdom
21/05/1999
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High court insolvency decisions are a bonus for landlords

A recent line of High court rulings and an unreported case Clarence Café Limited v Comchester Properties Limited (November 1998), have confirmed that a landlord can now forfeit a lease during an administration.

In ReLomax Leisure Limited (Times LR 4 May 1999) Mr Justice Neuberger ruled that a landlord's right to forfeit is not security over a company's property in the legal sense. The moratorium preventing anyone from taking steps to enforce security over a company's property during an administration therefore does not bind a landlord. The case finally confirms that landlords continue to remain in a strong position when faced with tenants in administration.

The result of this case is potentially a nail in the coffin for some large scale adminsitrations where many leasehold properties are involved. Creditors voting for an administration with a view to saving the company have no way of knowing whether this will be achieved as landlords will have the ability of frustrating the very purpose of the administration by seeking to forfeit the leases, or insisting on payment of rents placing themselves in a better position than other creditors.

For landlords, however, the case is a bonus as they can forfeit a lease and seek to market it elsewhere during the course of the administration, or achieve payment of all arrears of rent as a condition of any application for relief from forfeiture issued by the administrators.

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