What to do if your landlord goes bust

What do you do if you are a tenant in a pub and your landlord goes into administration or liquidation? What can you do to protect your tenancy?

It's a daunting question. But sadly the reality is it is a question some licensees will have to consider.

Finding an answer, though, can be difficult. More often than not, says Neil Lyon, partner at Kimbells LLP Solicitors, it's one that your lease or contract will not contain the answer to.

"There won't be anything in writing in your lease that covers this situation," says Lyon. "But you have a legal right. Just because your landlord has gone belly up, doesn't mean you have to go the same way."

So what should you do? First, find out whether your landlord has gone into administration or liquidation. Sounds simple, but it can sometimes be tricky to find out if they are having any difficulties at all.

"Often the first that a tenant knows that an administration order has been made in respect of their landlord is when they receive a rent invoice bearing the administrator's name," says Lyon.

"Apart from this, there shouldn't be much change as far as the tenant is concerned. The tenancy continues. There is still a landlord and tenant relationship. "The administrator will want to continue to take the rent, and will quickly take steps to ensure things continue much as before."

Often the administrator will sell the business and the new owners will become the tenant's direct landlord. Your rent deposits and any other financial investments should be passed over to the new landlord.

Forfeiture of the lease​

But if your landlord did not own the freehold and was a tenant itself, the actual landlord may try to forfeit the lease. Be aware that as a tenant you can apply for a relief from forfeiture to keep your lease.

If your landlord has gone into liquidation, however, the most important thing you need to know is that it does not affect your lease.

"Your landlord is effectively now the liquidator," says Lyon. "Because the lease has value, you are likely to find the leasehold is sold to new owners - who will then become the tenant's direct landlord."

Again, if your landlord is itself a tenant, the liquidator will look at the value of your lease and decide if it is of benefit to the creditors or is a burden and should be sold.

If he decides to get rid of it by disclaiming it then you can find yourself with no-one to pay rent to. You then have a three-month period to apply for something called a vesting order that creates a new landlord and tenant relationship.

"Disclaimer of the headlease does not affect the tenant's own lease," says Lyon. "But we would recommend paying the money into a special account and waiting until a valid rent invoice is produced when a new owner is found."

Those with a tenancy-at-will agreement, though, are more vulnerable, Lyon explains - as their tenancy is seen as a personal agreement between landlord and tenant. "You can find your tenancy is disposed of," he says. "But in any circumstance seek legal advice."