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Bankruptcy and debt relief orders don't 'rule out possession orders'

Posted: 1st December 2011   In: Dispute Resolution

The fact that a tenant has become bankrupt or obtained a debt relief order does not mean that they cannot have a possession order made against them on the grounds of rent arrears.

That was the ruling of the Court of Appeal in two separate cases involving two tenants.

Both tenants held assured tenancies and in both cases their landlords had applied for possession because of rent arrears.

The first tenant had been made bankrupt before the possession hearing; the second tenant had obtained a debt relief order.

Both argued that the court could not impose a possession order because the Insolvency Act 1986 (the Act) stated that no creditor should “have any remedy against the property … of the bankrupt in respect of that debt”.

The court accepted that the bankruptcy and debt relief order prevented any order being made for the payment of the arrears.

The main issue for the court to decide therefore was whether a bankruptcy order or a debt relief order also precluded the making of a possession order on the grounds of rent arrears relating to an assured tenancy.

In reaching its decision, the Court of Appeal said that a possession order was a remedy which restored to a landlord the full proprietary rights to his property. It was not a remedy that would lead to the rent arrears being paid and so was not prohibited by the Act.

Possession orders could therefore be made in each case.

Please contact Clare Jones if you would like more information about the issues raised in this article.