How can a tenant protect themselves if their landlord is heading for financial problems?

The insolvent tenant enjoys more column inches in the press than the insolvent landlord, but a tenant faced with a landlord in financial difficulties can encounter a number of complex problems.

Warning signs and first steps

Usually, the first warning sign a landlord is in financial difficulties is that service provision becomes unsatisfactory. If you notice a fall-off in the standard of the landlord's services, try to find out what is happening. More of a worry, but less easy to discover, is the non-payment of insurance premiums by the landlord. Always ensure that insurance for the building is renewed promptly: the lease should provide the mechanism for this and allow you to request a copy of the schedule and receipt for the last premium paid.

Remedies

A tenant faced with this situation is often limited to three options: -

• provide services or insurance itself and offset the cost of this against rent accruing (although, this right is often excluded by clear words in the lease); or
• turn to the Courts to either seek an injunction or appoint a receiver (although the landlord's status may affect the action which the tenant can take); or
• take action against a previous landlord (if there is one and it has not been released on subsequent sales of the reversion). This is unlikely to produce the required service, but could produce some compensation for the breach of the landlord’s obligations.