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Landlords as creditors: tenant insolvency

Some landlords struggle with their position in administrations (especially pre-packs) and CVAs, as illustrated by the naturally landlord-centric perspective of insolvency given by the British Property Federation.

Landlords are so used to their powers of distraint and forfeiture maintaining their income streams from financially distressed tenants that they can fail to appreciate that formal insolvency will recognise them as mere unsecured creditors (albeit with a property that may or may not have value to the business) alongside all other suppliers.

I've talked about the issues of CVAs and Landlords before on this blog and commented on tenant insolvency under the InsolvencyNews item Rent deadline threatens retailers.

There is clearly much ground to be covered in convincing all landlords that it is not the insolvency procedure that causes them loss, but the underlying insolvency and the mismatch between their income expectations and the revenue that the property is able to generate.

Particularly in multi-site businesses there is no rationale for an insolvent business to continue to occupy uneconomic premises. All creditors should recognise that, whatever their particular concern, the business should, and the insolvency practitioner will, maximise overall value - even if some individual creditors, such as landlords with leases that have no value to the business, cannot continue to supply to the continuing or successor business.

 

 

Date: 1st April, 2010
Author: Chris Laughton

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