Author: Chris Alexander

First Quench Retailing Limited, owner of Threshers, Haddows, the Local and Wine Rack brands has gone into administration.  With around 1,300 outlets nationwide there will be many nervous landlords concerned about what administration means for them and their rental income.

Tenant insolvency is an increasing phenomenon as the difficult economic conditions persist.  The recession is impacting upon businesses of all sectors occupying every type of commercial premises.  Alongside employment costs, rent is a large item of a businesses expenditure and can be one of the first expenses a struggling tenant will default on.

Once a tenant enters into a formal insolvency procedure, whether it be administration an IVA/CVA, receivership, or liquidation a landlord is likely to loose out financially to some extent along with the other creditors (unless they can rely on a personal guarantees or other similar security).  Formal tenant insolvency can also complicate attempts to urgently recover possession of a property from a defaulting tenant, thereby frustrating attempts to re-let the property and preserve the rental income.

It is prudent for landlords to maintain a close relationship with their tenants and not to allow significant arrears to accumulate.  This is because once an insolvency procedure has been initiated, in many cases, there will be a moratorium on enforcement action which will prevent a landlord from taking any form of enforcement action against the tenant (generally without permission of either the Court or an insolvency practitioner).  Such delays can prove even more expensive for landlords who are already facing significant rent arrears.

We would always encourage landlord’s to take advice at an early stage before their options begin to narrow.