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ARTICLE · 29 OCTOBER 2008

Commercial Leases And The Disclaimer Process - A Brief Guide

Glovers Solicitors LLP
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One of the effects of the current economic climate has been a marked increase in the number of tenants going into liquidation.

United KingdomReal Estate and Construction
Kenny Friday
Kenny Friday

One of the effects of the current economic climate has been a marked increase in the number of tenants going into liquidation. Consequently, many landlords have found themselves on the receiving end of a notice of disclaimer from liquidators relating to their property.

What follows is a brief guide to the disclaimer process in the context of leasehold premises and company tenants.

Power to Disclaim

According to s.178 of the Insolvency Act 1986 ("IA"), a liquidator has the power, without the leave of the court, to disclaim 'onerous property'. 'Onerous property' includes property that 'may give rise to a liability to pay money or perform any other onerous act'. As a lease imposes liabilities on a tenant, including the payment of rent and the performance of covenants, it can clearly be classified as onerous property.

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