Dispute resolution

Debt recovery and navigating insolvency: what are the options for commercial UK landlords?

Published on 15th Mar 2023

There are many practical steps, pitfalls and strategies available for recovering commercial rent arrears, both before and after tenant insolvency

People in a meeting and close up of a gavel

In today's uncertain economic climate, many tenants are defaulting on their financial lease obligations which forces landlords to consider their available options to try to recover the debt and minimise their losses. Landlords may have numerous remedies, including forfeiting the lease, issuing debt proceedings, serving a statutory demand and exercising commercial rent arrears recovery. But problems can become exacerbated in the case of tenant insolvency, as there may be restrictions on using those remedies.

The landlord's position in these circumstances will depend on the type of insolvency procedure that has been commenced, and it is important to understand the differences between them. 

Landlords' debt recovery options 

While a tenant remains solvent, a landlord has several enforcement options to recover debts. In outline, the options are:

Drawing on rent deposit

A landlord will be able to draw down on any available rent deposit in accordance with the terms of the deed. 

Forfeiting the lease

Forfeiture (re-entry) is the landlord's contractual right to terminate the lease and take back the property where the tenant is in breach of its obligations, including not paying rent. 

In the case of non-payment of rent, this right can be exercised by simply changing the locks, providing the breach has not been waived. For all other breaches notice must be served giving the tenant time to remedy. Tenants also have the right to apply for relief.

Commencing debt proceedings

A landlord can issue a County Court debt claim against the tenant for the full amount of the arrears plus interest and legal costs. Because court fees are payable on issue this can be an expensive option and can become protracted if the tenant defends the claim. Judgment may also not result in payment and enforcement action will then be required which will increase costs. 

Serving a statutory demand

A statutory demand can be served on a tenant in respect of undisputed sums due under the lease. If the demanded sums are not paid within 21 days, the landlord can present a winding up petition. 

This is the first step towards a winding up order, rather than a strict form of debt recovery, however often the threat of insolvency proceedings can persuade a tenant to pay the debt. 

Commercial rent arrears recovery (CRAR)

CRAR allows a landlord to instruct an enforcement agent to seize a tenant's goods (after serving the required initial notice) and sell them to recover an equivalent value to the rent arrears. It has limitations as it can only be used for "basic" rent and cannot be exercised again certain goods but the impact can be effective. 

Pursuing a guarantor/former tenant

If the tenant has a guarantor, a landlord will be able to pursue them subject to the wording of the guarantee deed. Further, a landlord may be able to pursue a former tenant to the lease (if there is one) providing the former tenant provided an authorised guarantee agreement (AGA) when they assigned.

Pursuing undertenant

Where a tenant has sub-let its premises, the landlord can serve a notice which requires the subtenant to pay its rent directly to the superior landlord until the notice is replaced or withdrawn.

Landlords' options for dealing with insolvent tenants 

If a tenant enters into insolvency before a landlord has commenced or completed one of the above options, there may be restrictions on formal action a landlord may take. Different insolvency regimes have different restrictions, as well as advantages and disadvantages, which will affect the landlord's position.

Company voluntary arrangement 

A company voluntary arrangement (CVA) is a flexible formal insolvency procedure used by companies in financial distress to obtain legally binding arrangements with unsecured creditors to settle or reduce debts over an agreed period of time. 

The CVA itself will set out what enforcement remedies the landlord can and cannot use. The courts have recently scrutinised CVAs as landlords are concerned that they can lead to tenants "cherry picking" debts to offset and differential treatments of landlords.


This is a procedure to provide a company some "breathing room" to allow for reorganisation or a more advantageous realisation of assets under the protection of a statutory moratorium, during which creditors cannot enforce their claims against the company without leave of the court or the consent of the administrators. 

Rent will be payable as an administration expense if the property is being used for the purpose of the administration. Enforcement options for pre-administration arrears and other lease breaches will be limited and a landlord will rank as an unsecured creditor for any arrears.

Compulsory liquidation (by the court)

An insolvent company can be forced into liquidation if a winding up petition is presented to the court. The purpose of liquidation is to ensure that all the company's affairs have been dealt with and all its assets realised before the company is dissolved.

Where a tenant in liquidation remains in occupation of the premises, it can remain liable for the lease obligations as part of the expenses of the liquidation but a liquidator can unilaterally disclaim the lease if it is an "onerous contract" in order to avoid any liability.

Creditors voluntary liquidation 

A creditors voluntary liquidation (CVL) is an insolvent winding up procedure which involves the members of a company passing a resolution to liquidate the company, which is then approved by creditors. Proceedings may be stayed by the court and a landlord cannot exercise CRAR. A landlord may be able to recover rent arrears as an expense in the liquidation and, like an administration, will rank as an unsecured creditor for pre-liquidation arrears.

Schemes of arrangement/restructuring plans

These are compromises between a company and its creditors, approved by the court, which allow for a reorganisation or restructure of its debts. 

In a scheme of arrangement each class of creditor must approve it. By comparison, a restructuring plan (introduced by Part 26A of the Corporate Insolvency and Governance Act 2020) can be approved even if one of more classes of creditors vote against it, known as a "cross class cram down" mechanism.

Osborne Clarke comment

There are a range of options available to landlords looking to recover debt or deal with insolvent tenants. In the current economic climate, we are likely to see an increase in the number of tenants struggling to meet their obligations and so it will be critical for landlords to be forearmed and take appropriate steps at an early stage to safeguard their position. As highlighted above, there are restrictions on the steps that can be taken once a tenant has entered an insolvency regime, so landlords should consider seeking legal advice at the first sign that a tenant is in difficulties. 

Navigating insolvency, and the strategies and pitfalls for commercial landlords and tenants, will be explored by Tom Bumstead, Alex Foxon and Claire Bundy in a webinar on 29 March at 12pm, as part of Osborne Clarke's Disputes Week. There is a great line up of future-focused webinars from our disputes and risk team, so please sign up and join us.


* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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