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SSRL Realisations v Lazari – Unlawful assignment and forfeiture

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05/02/2016

In SSRL V Lazari the Court of Appeal emphasised the importance of alienation provisions in a lease and indicated that financial prejudice may not necessarily provide a free pass for administrators.

As part of a pre-pack sale of the ailing tenant company, administrators allowed a proposed assignee into occupation of premises, pending consent from the landlord to the assignment. This occupation was (as is typical in such cases) in breach of the terms of the lease. The landlord objected to the proposed assignment. The assignee was a ‘newco’; no authorised guarantee agreement  was offered to guarantee the payment of rent; and the lease contained various conditions upon which the landlord could  insist before granting consent, none of which were met.

The landlord therefore served notice to forfeit the lease due to the tenant’s insolvency and the unauthorised occupation. The landlord then applied to court to terminate the lease and recover possession.

The High Court and the Court of Appeal held that the purpose of the administration would not be impeded by allowing the landlord to pursue its proprietary rights, and thereby to recover possession. Although the administrators had sought to argue that they would be able to achieve a premium by assigning the lease, the court concluded that the administrators were unable to unlock any of that value due to the landlord’s lawful exercise of its rights and financial prejudice suffered by administrators may not necessarily be enough to prevent forfeiture.

This case reiterates that careful consideration must always be given to the terms of the lease, in particular the alienation provisions.

For further detail and analysis, please see our earlier briefing.

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