You’re a landlord and your tenant goes into administration. What do you need to know?

by | Mar 10, 2023 | Administration | 0 comments

Here are the key points for you, as a landlord to keep in mind if your tenant goes into administration:

  1. If your tenant is in administration, they still have to pay rent as an expense for every day they occupy the property during the administration period. The rent is a priority expense that must be paid ahead of the administrator’s fees. While the administrator is not personally liable, they are responsible for making sure the rent is paid.
  2. The administrator cannot disclaim a lease, but they may decide they don’t need the property anymore and move out.
  3. The administrator may offer a surrender of the lease to terminate it, but you don’t have to accept it if you don’t want to.
  4. If the administrator returns the keys to the property but you don’t want to accept a surrender, you should acknowledge the receipt of the keys but make it clear that you don’t accept the surrender and the lease is still ongoing.
  5. You can’t forfeit the lease without the administrator’s consent or the court’s permission, which may depend on the circumstances.
  6. You can usually draw down on a rent deposit, but be mindful of timing as the tenant won’t be required to top it up during administration.
  7. A third-party guarantee shouldn’t be affected by the tenant’s administration, but you may need to serve a section 17 notice if the guarantee is with a former tenant or guarantor.
  8. If the tenant has sold their business and the buyer is occupying the property under a licence to occupy, you have several options. You could seek forfeiture of the lease, consent to the assignment or seek to negotiate better terms.
  9. Even if the tenant isn’t trading from the property, the lease continues until it expires or is surrendered by agreement, so you may need to seek the administrator’s consent before re-marketing the property.
  10. If you’re owed money that isn’t an expense of the administration, you can make a claim to the administrators, but keep in mind that recovery can be limited. The administrators should give you an idea of what to expect in terms of payment when they issue their proposals for the administration.

I hope you find this of use.