Leases: disclaimer in liquidation and bankruptcy

by Practical Law Property

A practice note that examines the process and effect of a disclaimer of a commercial lease when a tenant becomes insolvent. This note details the statutory power available to a liquidator in a company liquidation or a trustee in bankruptcy (TiB) in an individual's bankruptcy to disclaim "onerous property" under the Insolvency Act 1986 (IA 1986). It focuses on the significant impact a disclaimer has on the rights, interests, and liabilities of third parties, particularly landlords, subtenants, guarantors, and former tenants. This resource explores the complex legal landscape following a disclaimer, including the preservation of third-party liabilities as clarified in the key House of Lords decision in Hindcastle Limited v Barbara Attenborough Associates Limited and Others [1997] AC 70, 86. It also discusses the practical implications for landlords who repossess property and the process for interested parties, such as subtenants and guarantors, to apply for vesting orders to protect their position.