Liability of subtenant when a lease is disclaimed
Liability of subtenant when a lease is disclaimed

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Liability of subtenant when a lease is disclaimed
  • Forfeiture
  • Vesting order
  • Notice to pay rent directly to landlord under the Commercial Rent Arrears Recovery (CRAR) procedure

A tenant’s liabilities under the lease come to an end upon disclaimer by a liquidator or a trustee in bankruptcy, but the liability of other parties, including subtenants, does not. The headlease accordingly continues as a ‘notional’ reversion (as described in the High Court case of Scottish Widows Plc v Tripipatkul). However, the landlord and subtenant do not have a direct relationship. Accordingly, if the subtenant performs the covenants in the headlease, the landlord will not be entitled to possession. The landlord does, however, have various options and remedies available, including forfeiture in the event that the subtenant breaches the terms of the headlease.

Forfeiture

In the event that the subtenant breaches the terms of the headlease, the landlord can forfeit the headlease (in its remaining notional sense ) (see Practice Note: Forfeiture of a lease) which will also terminate the sublease (see Practice Note: What happens to an underlease on termination of the lease?). It is n