Tenants in Administration – SSRL Realisations Ltd (In Administration)

Written on 8 Oct 2015

A recent case has raised some interesting considerations for administrators or for landlords whose tenants are in administration. Strada’s administrators had allowed a group SPV to occupy a unit of which Strada was the tenant for some time and the landlord sought forfeiture of the lease. The Company Court granted the landlord’s application, agreeing that the proposed assignee was not an appropriate replacement tenant as it had no covenant strength and that it was a realistic possibility for the landlord to find a replacement tenant, with good covenant strength and paying an increased rent instead.

Two points for consideration arise as a result: administrators of occupational tenants cannot assume that the Landlord will be prevented from forfeiture as a result of the moratorium, nor can they assume that they can present a landlord with their pre-pack replacement tenant and strong arm them to agree to an assignment. Alternative premises or other solutions may need to be considered. And on the flip side, landlords should feel more comfortable questioning the appropriateness of an incoming tenant and the implications of agreeing an assignment from tenants in administration, particularly where the alienation provisions in the lease allow the landlord to vet a tenant’s covenant strength.