This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
Welcome to Reed Smith's viewpoints — timely commentary from our lawyers on topics relevant to your business and wider industry. Browse to see the latest news and subscribe to receive updates on topics that matter to you, directly to your mailbox.
| 1 minute read

Distressed Tenants and Landlords' Options

First, the not-so-great news in figures:

  • 2023 saw the highest annual number of company insolvencies since 1993. 
  • As expected, the vast bulk of those were creditors voluntary liquidations, with an increase of 9% from 2022 to 20,577. 
  • In fact, December 2023 recorded the highest quarterly number of CVLs since 1960.
  • Although the number of compulsory liquidations was much lower, about a tenth the number of voluntary liquidations, these saw a huge increase of 44% from 2022, at least in part driven up by the removal of government aid put in place during the covid pandemic.
  • Administrations were up by 27% and CVAs up by 67% year on year. More particularly, CVAs in Q4 2023 were 100% up on the same quarter in 2022 and 22% up from Q3 2023. 

To put the numbers into stark relief, one in every 186 active companies fell into insolvent liquidation in 2023, only slightly lower than the figures recorded in the 2008-2009 recession. 

All this suggests that many companies, particularly SMEs, which managed to hold on through the pandemic and the energy crisis, have finally had to close their doors as a result of the relentless increase in the costs of running their business. Business rates certainly has a part to play in this and, although government measures are welcomed this year, rates remains the largest tax levied on many of the smaller operations.

 So, how does that leave landlords in terms of retaining tenants and recovering rent? 

We learnt a lot during the pandemic about compromise and that spirit remains, but landlords were also hard hit and we see signs that they are beginning to get tougher on defaulting tenants. Forfeiture has come into vogue after a long absence and the use of statutory demands and the insolvency process is on the increase. In this difficult environment, more than ever, it is important for landlords to position themselves as a creditor that gets paid first and that means having conversations at an early stage to restructure leases where possible, and/or to obtain security for rent in the form of guarantees and rent deposits. Anticipating a tenant’s potential default becomes key and landlords must be vigilant, keeping on top of visual inspections and credit checks. Tenants for their part need to have discussions with landlords as soon as they get into difficulty. Communication was found during the pandemic to be key to the ongoing relationship and this is the case as much now as it was then.


real estate litigation, recession, insolvency, creditors voluntary liquidations, liquidation, cvas, landlord and tennant, distress, real estate distress, distressed tenants