Disclaimer of Leases

The lockdown will likely lead to an increase in companies entering liquidation. The appointed liquidator might then issue a notice to “disclaim” a lease if it is unprofitable or if it can’t readily sell the property or if it will give rise to a liability to pay money or perform any other onerous act.

A disclaimer should not affect third party rights, for example a sub-tenant’s rights of occupation, save to the extent necessary to release the insolvent company of its interest in the property. Disclaimer of a lease can have complex and far reaching effects. Landlords should pause before taking back property covered by the disclaimer as taking possession would end any guarantee and other third-party liabilities upon which the landlord may be entitled to call. Sub-tenants, guarantors or lenders may need to apply to the court to protect their positions and/or minimise future financial exposure to the landlord.

This is a complex area of law and if you need to know more, please contact Meera Patel.

The contents of this email are intended for general information only and does not constitute legal advice. Wallace LLP cannot accept responsibility for any loss arising from the use of the content in this email. This information was prepared on 6 May 2020.