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The Tenants Bankrupt!

We have come across two decisions from earlier this Summer dealing with the problem of what to do when faced with a Tenant who is made bankrupt or enters into a Debt Relief Order.

Generally anyone who is made bankrupt or obtains a Debt Relief Order is subject to certain moratoriums on proceedings and the recovery of money which they owed prior to the Court Order making them bankrupt etc. This means that landlords can find themselves with a tenant who has run up arrears which they then cannot recover save for making a claim in the insolvency process under which it is likely they will only recover a small proportion of the monies.

In Sharples v. Places for People Homes Limited (bankruptcy) and Godfrey v. A2 Dominion Homes Limited (debt relief order) the Court of Appeal gave consideration as to whether a Landlord may bring Possession proceedings relying on arrears as a ground for possession not withstanding that the Tenant was subject to some form of insolvency procedure.

The Court determined that Landlords could bring proceedings relying on the rent arrears in the usual way if the ground could be made out then the insolvency of itself would not prevent the court making an Order for Possession in these circumstances. What the Court did say is that the Court could not make a monetary Judgment and nor could it suspend any Order on terms requiring the arrears to be paid.

Whilst often a Landlord may be best advised to rely on Section 21 if at all possible obviously this is not always available. Landlords will therefore still have the option of Section 8 proceedings.

4 Comments

  • Caroline France 24th October 2011 at 10:49 am

    I do not understand the following sentence or I am reading it the wrong way, or, perhaps, it needs some punctuation? Whichever way I read it, it doesn’t make sense to me. “Provided in the usual way the ground could be made out the insolvency of itself would not prevent the court making an Order for Possession in these circumstances.”

  • P Moir 1st November 2011 at 9:41 am

    I would welcome an extension to this article covering what action is needed (if any) if a tenant is made bankrupt but continues paying the rent. What is our duty to the landlord and to The Insolvency Service.

    • PainSmith 3rd November 2011 at 11:30 pm

      Payments will be made by the trustee. He will allow for the continued payments if that is possible, if not then the landlord will need to take steps to evict.

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