What can I do as a landlord when my tenant becomes insolvent?

August 16, 2023
The retail market continues to struggle amid the ongoing economic strain experienced in the UK throughout 2023.

So far this year, there have been 2,302 store closures, as retailers suffer the hangover of the pandemic.

Together with the effects of inflation on materials and labour costs and rising business rates, many retailers are defaulting on their financial lease obligations and 31% of store closures this year have been from businesses which have gone into administration.

But what happens when a tenant becomes insolvent and how can landlords recover rental arrears owed to them?

Tom Horton, Senior Surveyor in our property asset management team, discusses the key considerations for landlords and the options available to them.

Landlords have faced a trio of challenging years when it comes to recovery of rental debt, having undergone a period rental concession throughout covid, to protect retailers.

Wherever possible, landlords tried to give rental concessions or restructure leases to base them on turnover rents in order to try to share the pain between landlord and tenant.

This undoubtedly helped retailers to limp through the pandemic, but many continue to struggle despite emerging from the other side of covid.

And it’s not just the smaller retailers who are affected, we have seen the demise of many a large retail company – from TM Lewin and Sofa Workshop to McColls and Debenhams.

When faced with tenants defaulting on their lease obligations, it is important to know, as a landlord, what options are available to you to recover rental arrears and limit your financial losses, as these can vary depending on the type of insolvency that your tenant experiences.

“Knowing what option will ensure the best possible debt recovery for you as a landlord, can be difficult, so it is important to appoint a professional adviser early on in the process.

Tom Horton, Senior Surveyor, Vail Williams LLP.
What types of insolvency exist?

There are three types of insolvency that your retail tenants can experience:

Company Voluntary Arrangement (CVA)

This is where there is a statutory compromise to discharge liabilities, and landlords are essentially forced into what is being agreed, usually at a reduced rate.


When a company enters administration, it is a situation that they are forced into, and the company can be rescued as a going concern. This protects creditors and achieves a better result through the realisation of property and finding a new creditor.

However, whilst in administration, it isn’t possible for landlords to recover rental arrears easily.

Compulsory Insolvency (Liquidation or Winding Up)

This is the voluntary liquidation of the company so that they can pay off creditors, allowing liquidators to be appointed and assets and debts to be realised and distributed to creditors.

The options for debt recovery will depend on the type of insolvency your tenant experiences, but can include:

Forfeiting the lease

This is where the landlord enters the property via peaceable re-entry or a Court Order to take possession.

Recovering rent deposits

The landlord can withhold deposits from the tenant either held by themselves or their appointed agents.

Using guarantors

A company or individual guarantees the tenant’s performance of the lease obligations.

CRAR (Commercial Rent Arrears Recovery)

This is a process that landlords can use to recover commercial rent (+ 7 days outstanding) outside of the courts. CRAR cannot be used when a company is in liquidation, but you can call upon guarantors.

Knowing what option will ensure the best possible debt recovery for you as a landlord, can be difficult, so it is important to appoint a professional adviser early on in the process.

Vail Williams can support you in engaging early on with appointed administrators and liquidators, whilst advising on the best recovery option available to you, depending on type of insolvency that the tenant experiences.