The start of 2026 has seen a number of national retailers and restaurants head towards insolvency and, given the prevailing economic outlook for these sectors, this trend looks likely to continue. Tenant insolvency can be worrying for landlords, but a clear plan can help protect their interests. Here is a timely reminder of what landlords need to know.
Spot the warning signs
Look out for persistent late payments, requests for rent concessions, or news of financial trouble. Acting early gives you more options.
Understand what happens in insolvency
When a tenant enters administration, liquidation, or seeks to compromise debts and obligations by way of a Company Voluntary Arrangement (CVA) or Restructuring Plan (RP), the rules change and landlords’ options may be restricted. For example:
- Administration: Landlords are prevented from forfeiting leases or taking enforcement action without consent from the Administrator or the court. Restrictions may apply before Administrators are appointed, if a notice of intention or court application to appoint administrators is filed with the court.
- Liquidation: Restrictions apply in some circumstances. Importantly, an English liquidator can disclaim the lease, leaving landlords with an unsecured claim for arrears. Guarantors remain liable and may be obliged to take a new lease.
- CVA: the arrangement may reduce rent, alter lease terms such as by inserting termination options or limiting dilapidations liability.
- RP: from a landlord’s perspective this arrangement will operate in a similar manner to a CVA with the RP seeking to compromise the tenant’s liability for arrears of rent, service charge and dilapidations.
If the tenant is an individual, bankruptcy applies, and the trustee takes over their obligations. Landlords may still take enforcement action, however such action may be stayed (paused).
What can landlords do?
- Check the lease: Does it include insolvency triggers for forfeiture? Are there guarantees or rent deposits you can call on?
- Forfeiture: In England & Wales, landlords must serve a Section 146 notice before forfeiting on the grounds of insolvency. If the premises are occupied, a court order may be needed. Landlords may need consent from the insolvency practitioner or court.
- Negotiate: Sometimes agreeing a surrender may be the best outcome, if the premises can be re-let. On a difficult rental market, landlords may agree a temporary rent reduction to avoid empty premises.
- CRAR (Commercial Rent Arrears Recovery): This can be used in some cases, but restrictions apply during insolvency.
Maximise recovery
Landlords should:
- Claim arrears via the insolvency process;
- Drawn down rent deposits or enforce guarantees promptly. Check whether arrears may be pursued from previous tenants (in which case, serve notice within the applicable timeframes – usually 6 months);
- Engage and vote in CVA/ RP process to protect their interests. It is not impossible for CVA/RP terms to be changed, if they unfairly affect landlords;
- Consider carefully how quickly premises may be re-let before pursuing forfeiture, to avoid taking on liability (e.g. for business rates);
- If the Insolvency Practitioner uses the premises for the benefit of creditors make sure you are paid the rent (and other charges) which are due and owing.
Reduce future risk – prevention is better than the cure
- Carry out thorough financial checks before granting leases;
- Ensure leases are well drafted, with clear insolvency clauses and robust security;
- Consider guarantees or rent deposits for higher-risk tenants;
- Engage with tenants regularly to ensure early warning signs are spotted.
Key takeaways
Landlord must act quickly, know their rights, and seek advice before taking action. Tenant insolvency doesn’t have to mean a total loss—strategic steps can help landlords recover rent and protect their property.
If you are a commercial landlord or tenant seeking to deal with insolvency, or you require advice about these issues and how they may impact you or your business, please do not hesitate to get in touch with our Real Estate Disputes team or your usual Brodies contact.
