When a company goes bankrupt, this has major consequences for ongoing contracts, including the lease agreement for the business premises. But what exactly happens to the lease when the tenant goes bankrupt? And what rights and obligations do the landlord, the bankruptcy trustee, and any subtenants have?

The tenancy law lawyers at Arslan Advocaten explain what the rules are and how you can protect yourself in the event of bankruptcy.

Bankruptcy of the tenant

When a tenant goes bankrupt, a bankruptcy trustee is appointed who takes over the management of the business.

Rights and obligations of the bankruptcy trustee

• The bankruptcy trustee may terminate the lease agreement by notice with a notice period of up to 3 months, regardless of what is stated in the lease (Art. 39 Bankruptcy Act).

• The rent must continue to be paid until the moment of termination.

• Outstanding rent from before the bankruptcy declaration is treated as unsecured claim – the landlord ends up at the back of the creditors’ queue.

Consequences for the landlord

• The landlord cannot simply terminate the lease due to bankruptcy, unless this is properly arranged contractually and accepted by the court.

• Often the landlord receives only part of the overdue rent back.

Bankruptcy of the landlord

The landlord’s bankruptcy also has consequences:

• The trustee may attempt to sell the property.

• Existing lease agreements remain in force: the tenant retains security of tenure.

• The buyer of the property must honor the existing lease agreement.

Subletting and bankruptcy

In the event of the primary tenant’s bankruptcy:

• The subtenant is dependent on the primary tenant.

• If the trustee terminates the head lease, it usually also ends the sublease.

• Subtenants can sometimes claim damages, but are often in a weak position.

Examples from practice

• Restaurant in Amsterdam: the tenant went bankrupt. The trustee terminated the lease within 3 months, allowing the landlord to quickly rent the premises to another party.

• Shopping center in Utrecht: the landlord went bankrupt. The retailer was allowed to stay because the lease was taken over by the buyer of the property.

• Subtenant in Rotterdam: lost his commercial space when the main tenant went bankrupt. The subtenant had no independent right to remain.

Checklist for bankruptcy and lease

• 📑 Check whether your lease agreement contains provisions about bankruptcy.

• 📅 Note the notice period of up to 3 months by the bankruptcy trustee.

• 💶 Be aware that rent arrears are usually only repaid in part.

• 🏠 As a landlord: be alert in case of the tenant’s bankruptcy and assert your rights directly with the bankruptcy trustee.

• ⚖️ Consult a lawyer for strategy regarding a restart or new leasing.

Frequently Asked Questions (FAQ)

1. Can a bankruptcy trustee simply terminate the lease?
Yes, the bankruptcy trustee may always terminate the lease agreement with up to 3 months’ notice.

2. As a landlord, will I get my rent arrears back?
Often only partially, because this is an unsecured claim in the bankruptcy.

3. Can I remain as a tenant if my landlord goes bankrupt?
Yes, ongoing lease agreements remain valid. The new owner must honor them.

4. What happens to a sublease if the main tenant goes bankrupt?
Usually the sublease ends automatically, unless special arrangements have been made.

Conclusion

Bankruptcy has major consequences for lease agreements. In the event of the tenant’s bankruptcy, the bankruptcy trustee can always terminate the lease within 3 months. In the event of the landlord’s bankruptcy, however, the tenant retains tenant protections. Subtenants often face additional risk.

The tenancy law lawyers at Arslan Advocaten advise and litigate in disputes concerning bankruptcy and lease agreements, for both landlords and tenants.