Q&As

A tenant is granting a sublease, but will be putting themselves into administration either before or after exchange of contracts. If the landlord forfeits the lease, what happens to the sublease if contracts have already been exchanged?

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Published on LexisPSL on 01/09/2016

The following Property Q&A provides comprehensive and up to date legal information covering:

  • A tenant is granting a sublease, but will be putting themselves into administration either before or after exchange of contracts. If the landlord forfeits the lease, what happens to the sublease if contracts have already been exchanged?

A tenant is granting a sublease, but will be putting themselves into administration either before or after exchange of contracts. If the landlord forfeits the lease, what happens to the sublease if contracts have already been exchanged?

As a preliminary point, this Q&A states the company will be entering administration either before or after contracts for the sublease are exchanged. However, once a company has entered administration, the directors in effect lose control of the company to the administrator who may or may not decide to enter into the sublease. It is unlikely that the company (acting through its administrators) would grant the sublease in administration; this will depend on what the administrator intends to do with the business and assets of the company.

We also note that it is an unusual step for a company to take to grant a sublease prior to entering administration. We do not have the full circumstances surrounding this decision, but note that there may be ramifications from the perspective of directors’ duties and antecedent transactions. For further details, see sub-topic: Directors' and members' issues—overview and Practice Note: Antecedent transaction claims by an office holder in liquidation or administration

This question implies that the sublease

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