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Fri 06 Nov 2015

Commercial Property: What do the changes to bankruptcy petitions mean for landlords?

Commercial Property: What do the changes to bankruptcy petitions mean for landlords?

The law has changed in respect of the threshold that is required before a bankruptcy petition can be made.

For years, practitioners have had in their mind that the threshold is £750. However, from 1st October it increased to £5,000.

What does this mean for commercial property?

Well, the service of a statutory demand and bankruptcy petition was previously a very useful tool in respect of being able to recover rent arrears for landlords. However, the danger now is that landlord’s will have to wait a much longer period of time in order for such arrears to build-up to the threshold of £5,000 before it can now serve a statutory demand for unpaid rent. And many won’t want to or be able to wait that long.

What should a landlord now be considering in respect of this updated law?

This update to the Insolvency Act 1986 shows a greater need to have a rental deposit or a guarantor in place where you have a new tenant who is an individual.

Our view is that a rent deposit deed is the best way forward here as the landlord will then actually be holding the funds it requires should there be any breach pursuant to the commercial lease.

Other alternatives could be forfeiture of the lease (although it may be the case that the tenant subsequently applies for relief against forfeiture). Another alternative would be to sue the tenant for the debt which is due or to take Commercial Rent Arrears Recovery (CRAR) which is a method of enforcing the recovery of rent arrears.

Should you require any further advice in relation to the above then please contact James Goff - jgoff@jpclaw.co.uk

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