In the continuing uncertainty of the current economic climate, and with a tough financial regime introduced by the new government, landlords may still find themselves faced with an insolvent tenant.

A liquidator or trustee in bankruptcy, or ‘office holders’, may disclaim any onerous property belonging to an insolvent company or a bankrupt individual. Disclaimer is most commonly used to free an insolvent company or bankrupt from their lease obligations. A disclaimer has the effect of releasing an insolvent company or bankrupt individual from any further liability under the lease of their property.

On 6 April 2010 new rules came into force simplifying the procedure whereby office holders can disclaim leases, or indeed any other onerous property. The Insolvency (Amendment) Rules 2010 (SI 2010/686) (2010 Rules) removed the need for the court to seal a notice of disclaimer. Instead, the disclaimer notice is effective as soon as an office holder authenticates it.

Following the introduction of the 2010 Rules, office holders can disclaim leases by:

  • preparing a notice of disclaimer. This must include enough detail on the relevant form to enable ready identification of the property being disclaimed;
  • authenticating and dating the notice of disclaimer, which will be effective from that date; there is no longer any requirement to lodge the notice at court or for the court to seal the notice for it to become effective;
  • sending a copy of the notice to the Land Registry, if the property being disclaimed is a registered interest in land;
  • in the case of a liquidator of an insolvent company, sending a copy of the notice to the registrar of companies;
  • sending a copy of the notice within seven business days of the date of the notice to every person;
    • who claims an interest in the disclaimed property; or
    • is under any liability in respect of the disclaimed property (other than an obligation that the disclaimer brings to an end).

Notice to elect

Any person with an interest in property, usually landlords, in which a company in liquidation or a bankrupt also has an interest, may require the office holder to decide whether to disclaim the property in question. The interested party must serve the office holder with a notice to that effect (a notice to elect). Once served with a notice to elect, the office holder must issue a notice of disclaimer within 28 days of the request, failing which he loses the ability to do so.