Landlord Insolvency: Right to Collect Rent

Notice should be delivered to all tenants advising them of the appointment and instructing them to pay their rent, and arrears of rent, to the Receiver. Without notice, the tenants have no obligation to pay the Receiver.

An instrument appointed Receiver must institute all collection enforcement in the landlord’s name unless the tenant has attorned to the Receiver. Court appointments normally include a provision that all tenants attorn and become tenants of the Receiver. Accordingly, collection may be made in the Receiver’s name in those situations involving Court appointments.

Once the tenant has attorned to the Receiver, it is arguable that the tenants are no longer able to off-set any amounts owing from the landlord to them against ongoing rent obligations. The tenant’s claim against the landlord is personal in nature and the Receiver is not subject to such claims. There is no longer a mutuality of debts; therefore, legal off-set is no longer available to the tenant. However, the doctrine of equitable setoff may apply.

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