Tenancy Issues Arising In Insolvency

What should lessors do if faced with an insolvent tenant? Most leases allow the lessor to terminate on the tenant's insolvency, and often before then (for example, when a winding up application is filed). Before deciding whether to terminate however, lessors should consider legal matters including the lessor's contractual position, obligations and restrictions imposed by statute and commercial considerations:

Before exercising a contractual right to terminate, lessors should consider the following legal and commercial issues:

• Notices to be served before valid termination:
• • Under the lease: does the lease require a default notice to be served before terminating? Most leases will allow automatic termination for insolvency without prior service of a breach notice (giving the tenant opportunity to remedy the breach). However, lessors should check the technical requirements of the lease, and the form of any required notice.