Administration — the moratorium and super-priority rent
When a company enters administration (IA 1986 Sch.B1), an automatic moratorium blocks the landlord from forfeiting the lease, using CRAR, or issuing court proceedings for the rent debt without the administrator's consent or leave of court. Rent accruing after the administration appointment is an administration expense (super-priority) if the administrator uses the demised premises — based on Re Toshoku Finance UK plc [2002] UKHL 6. Pre-appointment rent arrears are unsecured claims.
CVA — landlord cramdown and the challenge right
A Company Voluntary Arrangement (IA 1986 Part I) approved by 75% by value of creditors binds all unsecured creditors including dissenting landlords. CVAs have been used by major retailers to reduce rents and close sites. A landlord who voted against can challenge within 28 days on grounds of unfair prejudice (IA 1986 s.6) — established in Lazari Properties 2 Ltd v New Look Retailers Ltd [2021]. Guarantors are not automatically released by a CVA.
Liquidation — disclaimer and vesting order
The liquidator can disclaim the lease as onerous property (IA 1986 s.178), ending all the company's lease obligations. The landlord regains vacant possession but must apply for a vesting order (IA 1986 s.181) before re-letting. The landlord proves as an unsecured creditor for arrears and the discounted value of future rent — typically recovering 5–20p in the pound. CRAR cannot be used after a winding-up order; use CRAR before the order if possible.
- Act immediately on the first sign of tenant distress — instruct specialist insolvency and property solicitors
- Use CRAR (take control of goods) before formal insolvency procedures begin — CRAR is blocked during administration
- Make formal demand on all guarantors simultaneously with proof of debt in the insolvency
- Notify buildings insurer immediately — standard policies often restrict cover for vacant properties after 30–60 days
- Apply to the court for a vesting order after disclaimer to obtain clear title before re-letting