How can a solvent company end its lease early with no break clause?

The Problem
Your tenant’s premises are over-rented and the lease has many years left to run. The tenant company has placed itself in voluntary liquidation and the lease has been disclaimed. Is that legal and what can you do?

The law The Insolvency Act 1986 entitles the tenant to act in that way and you, as landlord, cannot claim directly for future rent. However, you can claim compensation under the Act equating to your loss of rent. Solution Claim statutory compensation at the earliest opportunity, but beware! In a case last year (Christopher Moran Holdings Limited v. Bairstow & another) the Court of Appeal applied an 8.5% discount to the landlord’s claim reflecting the accelerated payment.

The case highlights that corporate tenants effectively have a revolving break option and this could be used as a weapon against landlords in rent review negotiations.

One footnote for landlords is that if there is a guarantor on the hook, then the guarantor can still be liable under the lease notwithstanding its disclaimer.