Claims on tenant's insolvency

Citation

Waterson, G. and Lee, R. (1999), "Claims on tenant's insolvency", Property Management, Vol. 17 No. 3. https://doi.org/10.1108/pm.1999.11317cab.004

Claims on tenant's insolvency

Christopher Moran Holdings Ltd v. Bairstow [1999] 14 EG 149

The detailed law of insolvency lies rather outside the scope of this legal update. Nonetheless, despite its complexity, readers may well wish to refer to the report of this case which has an important bearing on the financial claims of the landlord where the tenants' liquidator has exercised his right to disclaim the lease. Briefly, the lease was granted in 1990 for a term of 25 years at a rent rising to £160,000 pa in the fourth year and subject to review after the fifth year. In November 1994, by which time the rent due under the lease was some four times the market rent, the tenant company went into members voluntary liquidation and the liquidators disclaimed the lease. As regards the claim of the landlord on proving in the liquidation the House of Lords had this to say: the claim made by the landlord in these circumstances is not for future rent, it is for statutory compensation, it is not to be calculated as the equivalent of the lost future rent but as the difference between that amount (or rather, aggregation of amounts) and the rent which the landlord, having now recovered the demised property may reasonably be expected to obtain on a notional re-letting; further, it is to be discounted to make allowance for accelerated receipt (in this case at the rate of 8.5 per cent pa); finally the amount of compensation thus arrived at will attract interest at the statutory rate from the date of the disclaimer.