Insolvency - The Property Issues

Recent insolvencies of high profile retailers have served as a reminder that tenants of business premises can fail, with potentially serious consequences for all those with a stake in the business and the affected property.

The insolvency of a tenant obviously marks the point at which creditors, including the landlord, cannot be paid, and trading must cease. For its part, the landlord, with its income stream cut off, may face potential financial problems, particularly if the acquisition of the property has been financed with a bank loan which requires ongoing rental income for its servicing.

In some cases, a consensual solution may be possible. Another business may take the premises in question, and the change of tenant may be able to be effected either by an assignment of the lease or by an agreed surrender of the lease and the grant of a new lease by the landlord to the new tenant. Any such solution will require negotiation between the landlord and the