If you are a landlord where the tenant company goes into liquidation you should consider your options carefully before taking any action.

In such a case, the liquidator is able to disclaim “onerous property,” which is likely to include a lease at an open market (or similar) rent. The effect of the disclaimer is to bring the liability of the tenant company to an end as well as ending its interest in the property.

The liquidator can disclaim at any time, but the landlord can serve a notice on the liquidator requiring them to decide whether to disclaim. The liquidator must then disclaim within 28 days of the notice (unless a court approves an application to extend this time limit) or lose its right to do so. Obviously most landlords will want the lease to stay in place to protect them from having to pay business rates whilst they attempt to find a new tenant.

If a liquidator does serve a disclaimer then it only affects the rights and liabilities of the tenant company in liquidation; any other parties still bound by or guaranteeing the tenant’s obligations in the lease will not be released by the disclaimer. If such parties exist then do not take any steps to take back the property (such as accepting the return of the keys) as that could act as a surrender of the lease which would bring those third party obligations to an end.

If there is an undertenant then everything gets much more complicated, with the tenant retaining a bundle of rights but not necessarily having any direct contractual relationship with you as the landlord. In those circumstances you will need to discuss the position with your legal advisor to get the best outcome.

So, while a tenant going into liquidation is a bad situation, what you do next can affect the end result.