Who can disclaim a lease?

A liquidator or trustee in bankruptcy can disclaim "onerous property" in order for the assets of the company, or the bankrupt's estate, to be effectively wound up. (By way of contrast, where the tenant is in receivership or administration the objective is generally not to wind up affairs but to give an opportunity to turn a business round).  "Onerous property" means any unprofitable contracts and any other property which is unsaleable or not readily saleable, or is such that it may give rise to a liability to pay money or perform any other onerous act.

A lease will normally be onerous property and most leasehold interests may be disclaimed, whether fixed term or periodic, and whether made by deed, by way of a written contract only, or created orally.  It appears that a tenancy continuing under the Landlord  and Tenant Act 1954 will also be an interest which can be disclaimed by the trustee in bankruptcy or liquidator of the tenant.  In addition, it is likely that an agreement to take a lease can be disclaimed, as an unprofitable contract.  Any disclaimer must be in respect of the whole (not part) of the property.

If a Tenant is having problems paying the lease rent, can the Landlord temporarily waive the full rent?

A lease being a contract, there is no reason why the landlord and tenant cannot agree to waive the rent in whole or in part, although it may also be necessary (or at least advisable) to join any guarantor into any arrangement. In addition, if the landlord holds the property under a superior lease, he will need to check its terms for any restrictions on waiving or varying the sublease terms and obtain superior landlord's consent where required.

Any rental waiver should be recorded in writing between the parties to ensure that the terms of the waiver are clear.  Issues such as the amount of the rent being waived, whether it is a complete waiver for a period, or simply a postponement of part of the rent, whether the reduced rent is to be paid monthly, rather than quarterly and the treatment of any interest will need to be covered.

The parties should also consider whether the concession is to be for a fixed period or whether the landlord is going to monitor the position from time to time and retain the right to require a return to the lease terms on notice and also the implications for the tenant if it does not comply with the terms of the concession.  The arrangement will usually be personal to the tenant, but may be personal to the landlord or may be expressed to bind the landlord's successors.

Finally, if the landlord is prepared to agree a waiver of rent (particularly if it is a complete waiver) the landlord should consider whether he wishes to seek some concession in return from the tenant – which should also be set out in writing.  If the concession being granted by the tenant amounts to a long term variation of the lease it should be effected by a formal Deed of Variation.

More insolvency questions will be featured in the next edition of the Informer.

Please contact Jayne or Joe if you would like to discuss the issues raised in this article.