Ireland: Insolvency Implications For Commercial Leases

Last Updated: 14 December 2011
Article by Sarah O'Mahony

It is symptomatic of the current financial climate that we are frequently asked to advise on a landlord's remedies against the corporate tenant of an occupational lease in circumstances of the latter's insolvency. The various categories of corporate insolvency and the landlord's position are considered below:


The landlord's position vis-ŕ-vis rental payments due to him pursuant to the lease (including rent, service charge and other payments expressed as being payable to the landlord thereunder) differs depending on whether the same accrued prior to the commencement of the liquidation (in respect of which the landlord ranks as an unsecured creditor), or subsequent to the commencement of the liquidation. In respect of the latter, if the liquidator elects to occupy the property (which is typically done in consultation with he landlord for an agreed period) and where the property is used for the benefit of the liquidation and is necessary for the winding up, then the rent and other expenses are deemed an expense of the liquidation.1

Notwithstanding the express terms of a comprehensively worded forfeiture clause, a landlord cannot forfeit a lease for the fact of the insolvency until twelve months have expired since the commencing of the liquidation. This protection does not extend to the landlord's entitlement to forfeit for non-payment of rent, which is unaffected (although a liquidator, like a tenant, will enjoy an equitable right to apply to court for relief against forfeiture for non-payment of rent). The liquidator will also enjoy certain statutory protections which are afforded to tenants, and which require a landlord to serve a notice of non-financial breach of covenant upon the tenant, which specifies the relevant breach of covenant and requires to be remedied.

If a liquidator has no use for the property, he will seek to negotiate a surrender of the lease to the landlord. If the landlord does not accept the lease, the liquidator has the option to go to court to disclaim an 'onerous' lease, at any time within the 12 month period commencing on the liquidation2. An onerous lease is described as any lease which constitutes a liability to the holder (so it is safe to assume that most commercial occupational leases would be deemed to be onerous for the purposes of this test).

This can leave the landlord in a situation where he is in a position of uncertainty for a prolonged period of time. If negotiations are not advancing satisfactorily between the liquidator and the landlord, then the landlord can force the liquidator to decide whether or not to disclaim a lease by serving a 28 day notice on him, within which period the liquidator has to confirm whether or not he intends to disclaim the lease.3 If the liquidator is occupying the premises in a manner which allows the rent to be deemed an expense of the liquidation, then this ceases to be the case as soon as the liquidator serves notice of intention to disclaim.

Upon a hearing of an application for disclaiming of a lease, a court will consider the amount of compensation which is payable to the landlord and the landlord must prove in the liquidation as an unsecured creditor. If the liquidator wishes to assign the lease to a third party, and the lease requires the landlord's consent, the landlord can make such consent conditional upon the discharge of arrears and it is legitimate for the liquidator to discharge pre-liquidation rent as an expense involved in realising the assets for the benefit of the creditors (notwithstanding its unsecured status).

Liability of a guarantor/Rent deposits

A disclaimer of a lease in liquidation will not usually impact upon the position of a guarantor of the lease, and the guarantor remains liable to the landlord for the accrued arrears. If the landlord has a contractual entitlement to withdraw from a rental deposit account, he cannot do so to the extent that the right accrues post-commencement of the liquidation, save in circumstances where the landlord has taken a fixed charge over the rent deposit account (in which case the debt owing is, to that extent, secured, provided the appropriate requisite filings in the Companies Registration Office have been completed).


The entitlement of a liquidator to disclaim an onerous lease does not extend to a receiver and most occupational leases will entitle a landlord to exercise a forfeiture and re-entry provision, on the appointment of a receiver over any of the assets of the tenant company (but subject to the usual statutory and equitable reliefs against forfeiture being available). There is no moratorium on the exercise by the landlord of those remedies, and the ability of the landlord to pursue a guarantor or to have recourse to a rental deposit is unaffected.

A receiver, like a liquidator, is liable for payments under the lease only to the extent he uses the leasehold property during the receivership for the purposes of the receivership. Any rent arrears which accrued prior to the appointment of the receiver constitute an unsecured debt.


An examinership is a process pursuant to which an insolvent company, which is shown to have a reasonable prospect of survival, is afforded court protection for a defined period (to a maximum of 100 days). During this period, no action can be taken by a creditor - including a landlord - against that company (or a guarantor of that company's liabilities), which would otherwise be open to the creditor. As with the appointment of a liquidator, the examiner is not responsible for payment of rent and liability remains with the company. However, the landlord can call upon the examiner to "certify" the rent as an expense necessary for the survival of the business, giving it priority over other claims. This however is entirely at the discretion of the examiner.

If a scheme of arrangement (rescue plan) is proposed by the examiner and approved by the court, it then makes whatever orders are required to give it effect, and the examinership and court protection are at an end. While arrears of rent due as at the date of presentation of the examiners petition may be written down under the scheme of arrangement, it cannot provide for an extinguishment or reduction of future rental payments. In practice, the rent payable under the lease is usually re-negotiated before the scheme of arrangement is agreed. Any write down of the rental arrears can be pursued by the Landlord against any guarantor.

Another option open to the examiner is to apply to court to vest in themselves, all powers which they would have if they were appointed as a court-appointed liquidator, to include an entitlement to disclaim an onerous lease, or the insolvent company itself can seek to repudiate the lease by way of application to the High Court. A repudiation or disclaiming of the lease crystallises the debt owing to the landlord and the amount so quantified can be reduced by the examiner as part of the scheme of arrangement. It is of course also open to the landlord and the examiner to negotiate a surrender of the lease back to the landlord and the landlord can seek to recover part of the arrears of rent owing as part of the consideration.

It is important to be aware that in the case of an examinership where a scheme of arrangement for creditors is being proposed by the examiner, the landlord must notify the guarantor and give him the option of voting on the proposed scheme of arrangement. If this procedure is not completed, the guarantee will no longer be enforceable. However, if the scheme of arrangement has been put in place without the consent of the landlord, it is free to pursue the guarantor. It should also be noted that if the guarantor has to pay the landlord under the terms of the guarantee, it itself can claim as an unsecured creditor against the tenant.

The position of sub-tenants

The disclaiming or repudiation of a lease will not affect a sub-tenant but the sub-tenant will need to pay the rent (or apportioned part thereof) and perform the covenants in the headlease if it wishes to avoid forfeiture or ejectment proceedings. A sub-tenant can also apply to court in circumstances where an application is being made by a liquidator to disclaim a lease and apply to have the headlease vested in them; in a situation where the landlord and the liquidator negotiate a surrender of the lease, the position of the sub-tenant is again protected such that it is entitled to apply to court and the court may order that the sub-tenant steps into the shoes of the insolvent superior tenant. If however the sublease is one to which the Landlord and Tenant (Amendment) Act of 1980 applies (i.e. where the sub-tenant holds a statutorily-defined "tenement"), a sublease will not terminate where the superior lease is terminated "before its normal expiration" and the landlord becomes the landlord of the sublease (and the relationship is governed by the terms of the sublease rather than the superior lease). The sub-tenant holds the premises for the greater of the sub-rent or the proportion of the head rent fairly attributable to the premises.

It should also be borne in mind that a landlord is entitled by statute to require a sub-tenant to pay a rent directly to them in a situation where the tenant is in arrears of rent to the landlord, without enforcing any breach of covenant in the head lease against its own tenant.


1 There has been some case law to the effect that where a liquidator occupies property in order to sell it, the rent for that period may constitute an expense of the liquidation.

2 This 12 month period runs from the date of the liquidator becoming aware of the fact that the lease in circumstances where its existence is not known to him.

3 This may encourage the liquidator to commence negotiations to surrender the lease to the landlord, during which the landlord must weigh up the proportion of the arrears due under the lease which it would be likely to recover as an unsecured creditor as against what, if any, the liquidator is amenable to pay in partial discharge of the arrears (by way of premium payable on the surrender).

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions