Unfortunately, retail insolvencies in England and Wales are rising as tax increases and falling consumer spend push many retail businesses into survival mode, with many more retailers turning to professional advisors for assistance in navigating mounting costs. The latest company insolvency statistics show that retail trade insolvencies were up 20% year-on-year between May 2024 and May 2025.
In such challenging economic conditions, landlords must be prepared for retail tenants to encounter financial difficulties and for some to go out of business.
In this blog, our Retail Lawyers set out what options may be available to landlords if their retail tenant goes bust.
Immediate steps
Step 1 – Contact a solicitor
When a retail tenant goes bust, the key is to act quickly and seek specialist legal advice from a solicitor on your options. The specific actions you can take will depend on the type of insolvency process your tenant has entered and the terms of the lease.
Unfortunately, some insolvency processes make it more difficult or even impossible to get back control of the property, which will be most landlords' priority, so that the property can be re-let to another tenant as soon as possible.
Step 2 – Contact the insolvency practitioner (IP)
Contact the appointed IP. They will be managing the tenant’s affairs, and you will need to communicate with them to understand their intentions regarding the lease.
Step 3 – Secure the property (if vacant)
If the tenant has abandoned the property, you can secure it for safety. However, make sure you communicate that this is for security reasons only and not an act of forfeiture or surrender, which could waive your rights in respect of claims that could be brought.
Step 4 – Notify your insurer
Inform your insurance company that the property is or may become vacant. Unoccupied buildings are more vulnerable to risks like theft, vandalism, fire, and water damage, which a standard policy may not cover.
Failure to notify your insurer could lead to a claim under such circumstances being rejected. Most insurers will be able to put an alternative policy in place on the basis that the property is empty.
Failure to notify your insurer could lead to a claim under such circumstances being rejected. Most insurers will be able to put an alternative policy in place on the basis that the property is empty.
Types of insolvency processes
There are several different insolvency processes that may be used by a retail tenant in financial difficulties.
For companies, insolvency processes fall into two main categories depending on whether the company can be rescued as a going concern or not. Administrations, company voluntary arrangements and restructuring plans are utilised if the company can be rescued as a going concern.
Conversely, winding up and liquidation (whether on a compulsory or voluntary basis) will mean that the company will stop trading and the liquidation will end with the company being dissolved once all its assets have been collected and distributed to its creditors to any extent possible.
Company voluntary arrangements (CVAs)
A CVA is a flexible option for retailers, allowing them to reach an agreement with creditors over debt repayment, usually over an extended period of up to five years. CVAs often involve restructuring debts, reducing payments, or selling assets.
For retailers, a CVA can help terminate or renegotiate leases for underperforming outlets, providing relief to struggling businesses.
A CVA is initiated by a company’s directors, an administrator, or a liquidator. The proposal must first be reviewed by a licensed IP (the nominee), who assesses whether the CVA has a reasonable chance of success. The nominee must give notice of the CVA to all known creditors, which will almost certainly include a creditor landlord.
Until the CVA is entered into, a landlord (like any other creditor) is free to pursue any relevant remedies.
Once the CVA is entered into, then in respect of the debt owed by the tenant, the landlord creditor is bound by the terms of the CVA if it was entitled to vote on the terms of the CVA, regardless of whether or not the landlord actually voted or was notified of their right to vote. Landlords may challenge a CVA within 28 days of a CVA being approved if they consider that it is unfairly prejudiced by the CVA or that there was a material irregularity in relation to the vote.
A landlord’s right to forfeit the lease remains, but the tenant can apply for relief from forfeiture and, depending on the circumstances, may be granted relief if they either pay the reduced amount of arrears payable under the CVA or if they pay the full amount of the arrears.
There is no power for a lease to be disclaimed by the IP in connection with a CVA.
A CVA can cover rent payments due in the future. Whether it does so will depend on the terms of the particular CVA. Whether a CVA releases former tenants or guarantors of the tenant again also depends on the terms of the CVA and, in the case of a guarantor, upon the terms of the particular guarantee.
Administration
Administration is a process where a financially distressed company is placed under the control of an administrator, typically an IP. The administrator’s role is to manage the company’s affairs, business, and property to achieve one of three objectives:
- Rescuing the company as a going concern.
- Achieving a better result for creditors than liquidation would.
- Realising property to distribute to secured or preferential creditors.
A company can enter administration either through a court order or via an out-of-court appointment by the company, its directors, or a qualifying floating charge holder. Out-of-court appointments are more common.
The administration process gives the company breathing space by imposing a statutory moratorium, protecting it from creditor actions unless approved by the administrator or court.
Due to this moratorium, the actions available to a landlord are limited. During the moratorium period, permission of the court or the consent of the administrator is needed before the landlord is allowed to:
- Exercise commercial rent arrears recovery (CRAR) by authorising an enforcement agent to seize and potentially sell the tenant’s assets;
- Forfeit a lease by peaceable re-entry;
- Begin or continue any court proceedings (including court proceedings for forfeiture of a lease);
- Take any steps to enforce any security (for example, under a charged rent deposit).
- An administrator, whether appointed using the court-based route or the out-of-court route, has no power to disclaim the liability of a tenant under a lease.
If the company retains leasehold premises for the benefit of creditors during the course of the administration, the administrator must pay rent for the whole period of that occupation as an expense of the administration.
The rent due for the period of occupation should be treated as accruing from day to day. If rent falls due before the administrator’s period of occupation begins, or a payment of rent includes a period after the administrator’s occupation ends, the rent should be apportioned accordingly. Rent which is payable before or after the administrator’s occupation is an unsecured debt. You will need to submit a proof of debt claim to the IP, but you are likely to recover only a fraction, if anything, of the amount owed.
The rent due for the period of occupation should be treated as accruing from day to day. If rent falls due before the administrator’s period of occupation begins, or a payment of rent includes a period after the administrator’s occupation ends, the rent should be apportioned accordingly. Rent which is payable before or after the administrator’s occupation is an unsecured debt. You will need to submit a proof of debt claim to the IP, but you are likely to recover only a fraction, if anything, of the amount owed.
Winding-up or liquidation
Winding-up, or liquidation, allows for the realisation of a company’s assets, the settlement of its liabilities and its subsequent dissolution. When a retailer is insolvent, there are two types of winding-up: creditors voluntary liquidation (CVL) and compulsory liquidation.
If a tenant enters CVL, then:
- In terms of CRAR, if the landlord began the process of exercising CRAR before the start of the winding-up, the landlord will only be able to retain the benefit of CRAR if the relevant assets were sold before the start of the liquidation. The court does have the power to exempt the landlord from the effect of this provision where the court thinks fit. However, the court will only do so where weighty, special or exceptional circumstances apply.
- The landlord can, without leave of the court, sue for rent and forfeit the lease, whether by court action or peaceable re-entry. However, another creditor, the liquidator or a contributory (a person liable to contribute to the company’s assets on a winding-up) may apply to the court for an order restraining the same.
- In some cases, the current rent can be an expense of the liquidation if the payment of the rent constitutes a necessary disbursement of the liquidation. This will be the case if the liquidator retains the use of the premises to assist them in selling the assets of the company. If the rent ranks as an expense, this may influence a landlord’s decision as to whether and when to forfeit the lease.
- A liquidator has the power to disclaim the lease.
If a tenant enters compulsory liquidation then:
- In relation to CRAR, the landlord can be required to account to the preferential creditors (e.g. HMRC) for the exercise of CRAR within the 3 months before the winding-up order was made. The landlord then ranks immediately below the preferential creditors for payment of the whole of that amount.
If the landlord began the process of exercising CRAR before the presentation of the winding-up petition, the landlord will only be able to retain the benefit of CRAR if the relevant assets were sold before the petition was presented.
The court has the power to exempt the landlord from the effect of this, but will only do so where weighty, special or exceptional circumstances apply. If the CRAR procedure was started after the winding-up petition was presented, it will be void. - Between the presentation of the winding-up petition and the making of the order a landlord can begin an action for arrears without the leave of the court. However, another creditor, the company or a contributory can apply to have the action stayed.
- After the winding-up order is made, leave is needed to begin or continue an action for rent.
- In relation to forfeiture by court action, before a winding-up order is made, leave is not needed from the court but the action can be stayed by another creditor, the company or a contributory. After a winding-up order is made, leave from the court is needed to forfeit the lease.
- In the case of forfeiture by peaceable re-entry, between the presentation of the winding-up petition and the making of an order, leave is not needed, but another creditor, the company or contributory can apply for a stay. After a winding-up order is made, leave of the court is needed.
- In either a voluntary or a compulsory winding-up, a liquidator may disclaim onerous property. Onerous property usually includes leases. The effect of the disclaimer is that the rights and liabilities of the insolvent in the property are determined, but those of others continue. For example, a landlord may claim against a former tenant or guarantor.
Other options available for landlords
Where a retail tenant is unable to pay the rent, other options may be available to the landlord. These can include:
· Recovering rent from a former tenant or guarantor.
· Recovering rent from an undertenant.
· Taking money from a rent deposit deed.
Contact Our Retail Solicitors
If you are a landlord who needs advice on your options if your retail tenant has gone bust, please contact our Retail Team.
0161 941 4000
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Vicky Biggs
Legal Director
Vicky is a Legal Director in the Insolvency and Restructuring team at Myerson and has been with the firm since 2012. Utilising her commercial litigation experience, Vicky now specialises in contentious insolvency matters, advising insolvency practitioners, directors and individuals in relation to both corporate and personal insolvency issues.
Vicky advises on a wide range of insolvency matters, including claims made by administrators, liquidators and trustees in bankruptcy, director disqualification proceedings, remuneration approval applications, retention of title claims, validation orders, bankruptcy annulment applications and winding-up and bankruptcy petitions.
About Vicky Biggs