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
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The bankruptcy trustee may terminate the lease agreement by notice observing the agreed or customary notice period; a notice period of three months is in any event sufficient, even if the lease provides for a longer one (Art. 39 Bankruptcy Act).
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From the date of the bankruptcy order until the termination, the rent is an estate debt (boedelschuld), which is paid before ordinary creditors (Art. 39 Bankruptcy Act).
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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
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Under Article 39 of the Bankruptcy Act the landlord can also terminate the lease during the bankruptcy, observing the agreed or customary notice period; a notice period of three months is in any event sufficient.
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Often the landlord receives only part of the overdue rent back.
Bankruptcy of the landlord
The landlord’s bankruptcy also has consequences:
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The trustee may attempt to sell the property.
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Existing lease agreements remain in force: the tenant retains security of tenure.
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The buyer of the property must in principle honor the existing lease agreement (Article 7:226 DCC). An exception applies if a mortgage lender validly invokes a lease clause (huurbeding, Article 3:264 DCC) on a foreclosure sale; for business premises this can mean the lease cannot be enforced against the buyer.
Subletting and bankruptcy
In the event of the primary tenant’s bankruptcy:
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The subtenant is dependent on the primary tenant.
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If the trustee terminates the head lease, it usually also ends the sublease.
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Subtenants can sometimes claim damages, but are often in a weak position.
Examples (illustrative)
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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.
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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.
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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
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📑 Check whether your lease agreement contains provisions about bankruptcy.
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📅 Note the notice period of up to 3 months by the bankruptcy trustee.
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💶 Be aware that rent arrears are usually only repaid in part.
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🏠 As a landlord: be alert in case of the tenant’s bankruptcy and assert your rights directly with the bankruptcy trustee.
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⚖️ 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 trustee may terminate the lease early, regardless of its term; a notice period of three months is in any event sufficient (Art. 39 Bankruptcy Act). The landlord has the same right.
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?
In principle, yes: ongoing lease agreements remain valid and a new owner must honor them (Article 7:226 DCC), unless a mortgage lender validly invokes a lease clause on a foreclosure sale (Article 3:264 DCC).
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 terminate the lease early, with a notice period of at most three 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.
More frequently asked questions
What happens to my business lease if I file for bankruptcy?
In bankruptcy, a trustee can terminate your lease with up to 3 months’ notice, but rent must still be paid until that termination. The lease’s status depends on the bankruptcy process and whether the trustee chooses to continue or end the lease.
Can my landlord terminate the lease if I declare bankruptcy?
Yes. Under Article 39 of the Bankruptcy Act, not only the trustee but also the landlord can terminate the lease during the bankruptcy, observing the agreed or customary notice period; a notice period of three months is in any event sufficient. Until one of them terminates it, the lease remains in force.
What rights do subtenants have if the primary tenant goes bankrupt?
Subtenants generally depend on the primary tenant, and if the main lease is terminated by the trustee, the sublease usually ends as well. Subtenants often have limited options to claim damages.
What should I do as a landlord if my tenant files for bankruptcy?
As a landlord, you should review your lease agreement for bankruptcy clauses and act quickly by asserting your rights with the bankruptcy trustee. Consulting a lawyer can help develop a strategy for recovery or new leasing arrangements.
