Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Insolvency definition

What does Insolvency mean? In practice, insolvency describes a financial state where a debtor cannot meet liabilities when due, triggering remedies such as administration, liquidation or bankruptcy and informing directors’ duties and avoidance claims. For companies in England & Wales, Scotland and Northern Ireland, the Insolvency Act 1986, s 123 sets two alternative tests: - Cash‑flow insolvency: an inability to pay debts as they fall due. The inquiry is practical and forward‑looking, not confined to today’s bills (Re Patrick & Lyon Ltd [1933] Ch 786; BNY Corporate Trustee Services Ltd v Eurosail [2013] UKSC 28). - Balance‑sheet insolvency: liabilities (including contingent and prospective liabilities) exceed assets on...

Intermediate landlord insolvency: undertenant rights and obligations on CRAR, disclaimer and vesting orders, forfeiture and relief, surrender, and obligations to take a new lease (England and Wales)

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Practice notes

What are the issues for a tenant if an intermediate landlord becomes insolvent?

This Practice Note considers to whom the rent might be payable, and addresses disclaimer, forfeiture and surrender of the superior lease.

Rent payment

An insolvent landlord might default on rent owed to its superior landlord. Under the Commercial Rent arrears Recovery (CRAR) regime, a superior landlord may issue a notice requiring an undertenant to pay rent straight to the superior landlord where the immediate tenant is in arrears, continuing until those arrears are cleared. If the undertenant then does not pay, the superior landlord may exercise CRAR against the undertenant. To promote fairness, where the tenant pays any sum under a notice served by a superior landlord, the undertenant may deduct that sum from the rent due to its immediate landlord, even if the amount has already been paid in full or in part by another person, or the notice has been replaced with one served on a different undertenant (subject to specified exceptions in section 82 of the Tribunals, Courts and enforcement Act 2007). See Practice Note: Commercial rent arrears recovery (CRAR)...

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Web page updated on 21/05/2026

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