Nortel Networks UK Limited (the company) was a tenant under two leases. The company went into administration. The administrators occupied a small proportion of each of the premises to enable them to carry out the administration. Under the terms of both leases rent was payable quarterly in advance.

The landlord applied to the court for an order directing the administrators to pay the rent as an expense of the administration.

Where a landlord forfeits its lease, subject to any available relief or exemption, the landlord is liable to business rates in respect of the premises.

Empty premises business rates exemption will provide time-limited relief to a landlord who has re-entered premises. However, a landlord should be cautious of exercising its right to forfeit a lease in cases where it does not have another tenant "waiting in the wings".

The ratepayer

Business rates are paid by occupiers and, in certain circumstances, owners of premises.

A question facing many landlords is whether, when a tenant company faces insolvency and shows no intention of continuing to trade from the premises, they should take back the property and seek to relet it?

There are several key issues here, including:

• rates liability
• mitigating losses
• ability to recover from third parties and former tenants.

A landlord's decision has often turned on the type of insolvency faced by the tenant.

If a liquidator disclaims the lease:

Virgin Active has been in the news recently, as it has proposed restructuring plans which rely on the new legislation found in the Corporate Governance and Insolvency Act 2020.

In this insight, we will explain:

In 7636156 Canada Inc. (Re)[1], the Ontario Court of Appeal ("OCA") confirmed the right of a commercial landlord to draw on a letter of credit given as security pursuant to a lease, even when the draw takes place after the termination of the lease by the tenant's trustee in bankruptcy.

What is a CVA?

A CVA is an insolvency and rescue procedure under the Insolvency Act 1986, allowing a company in financial distress to make legally binding arrangements with its unsecured creditors. Typically, this involves rescheduling or reducing the company’s debts or even amending certain contractual terms.

In 2016 the High Court considered the validity of an assignment of a lease by a tenant to its guarantor. The antiavoidance provisions in section 25 of the Landlord and Tenant (Covenants) Act 1995 ("1995 Act") strictly limit the freedom of contract of parties to leases governed by that Act, broadly, those granted after 1995. Agreements which frustrate those provisions are void even if they are commercially justifiable.

BRIEF FACTS AND DECISION

EMI Group Limited v O&H Q1 Limited [2016] EWHC 529 (Ch)

Hong Kong’s notoriously landlord-friendly leases make it hard to renegotiate terms during an economic downturn, tying many tenants into leases well above market values. The territory’s high rents, added to 24 months of declining retail sales, have left retailers in Hong Kong feeling the chill. Many tenants may wish to look beyond their contractual rights and obligations to find a commercial solution. In such difficult circumstances, there are six options retailers could consider.

1. Rent restructure

A Chapter 11 debtor’s pre-bankruptcy “surrender of [two] … leases to [its landlord] could be regarded as a preferential transfer,” held the U.S. Court of Appeals for the Seventh Circuit on March 11, 2016. In re Great Lakes Quick Lube LP, 2016 WL 930298, at *2 (7th Cir. March 11, 2016).

The Fourth Circuit, on June 15, 2007, affirmed the dismissal of a Chapter 11 reorganization petition filed by a tenant debtor in a commercial lease dispute. Maryland Port Administration v. Premier Automotive Services, Incorporated (In re Premier Automotive Services, Incorporated), ___ F.3d ___, 2007 WL 1721951 (4th Cir. 6/15/07).