A recent call from an accountant contact prompted a discussion around leasehold forfeiture, which encompassed insolvency and property litigation advice for this particular matter.
The scenario was a familiar one, the directors of a light industrial business had attended the company’s premises on a wet Thursday morning to find that the premises’ landlord had instructed bailiffs to forfeit the lease by peaceable re-entry. The landlord apparently had no interest in pursuing the company for unpaid rent and instead wanted the vacant property to re-let at the earliest opportunity.
We were able to advise the company on its options, including the removal of the various tools and machinery from the property which was subject to a floating charge to a third-party.
What should they have done to avoid leasehold forfeiture?
If the company approached its accountant earlier, ideally when the directors became aware that the company would be unable to settle the rent which was about to fall due, there would potentially have been more options available to the company. For example, following discussions with a licenced insolvency practitioner it may have been possible to issue of a notice of intention to appoint administrators to the company.
This has the effect of imposing an interim moratorium on any legal processes, including forfeiture of the lease of the company’s property, without the permission of the Court.
Discussions could then have taken place, assuming an administrator was subsequently appointed to the company, to either rescue the company or to seek a sale of its business and assets.
The company may also have been able to negotiate its position with its landlord and have reached an accommodation, allowing it to continue to trade from a premises which it had occupied for over 20 years.
So what did happen?
As no action was taken, the company only had two viable options to move forward:
- Making an application to the court for relief from forfeiture whereby all rent arrears and landlord’s costs will need to be paid, or
- To accept the lease as terminated and remove its belongings.
Both of which can be challenging for a business to consider and could have been avoided, which is a salient reminder that early engagement and advice, particularly in situations where conversations are likely to be uncomfortable, can lead to more favourable outcomes than simply burying heads in the sand.
No matter how easy it seems to do nothing, it is seldom the best, or only, available option.
Talbots Law have specialist teams on hand to provide advice and legal support for all areas of insolvency, debt recovery and property litigation.
To tell us about your story, simply contact newbusiness@talbotslaw.co.uk or call our team on 0800 118 1500
DISCLAIMER
The contents of this blog or any other published by Talbots law cannot be considered as legal advice and should therefore not be acted on without prior consultation with a qualified solicitor or legal professional.