Tenancies excluded from bankrupt's estate HA 1988 s. 117
Tenancies (assured, protected, secure) are excluded from the bankrupt's estate under HA 1988 s. 117, but the trustee can serve notice to vest them.
In section 283 of the Insolvency Act 1986 (definition of bankrupt’s estate) at the end of subsection (3) (property excluded from the estate) there shall be inserted the following subsection— Subject to section 308A in Chapter IV, subsection (1) does not apply to— a tenancy which is an assured tenancy or an assured agricultural occupancy, within the meaning of Part I of the Housing Act 1988, and the terms of which inhibit an assignment as mentioned in section 127(5) of the Rent Act 1977, or a protected tenancy, within the meaning of the Rent Act 1977, in respect of which, by virtue of any provision of Part IX of that Act, no premium can lawfully be required as a condition of assignment, or a tenancy of a dwelling-house by virtue of which the bankrupt is, within the meaning of the Rent (Agriculture) Act 1976, a protected occupier of the dwelling-house, and the terms of which inhibit an assignment as mentioned in section 127(5) of the Rent Act 1977, or a secure tenancy, within the meaning of Part IV of the Housing Act 1985, which is not capable of being assigned, except in the cases mentioned in section 91(3) of that Act. After section 308 of that Act there shall be inserted the following section— Upon the service on the bankrupt by the trustee of a notice in writing under this section, any tenancy— which is excluded by virtue of section 283(3A) from the bankrupt’s estate, and to which the notice relates, vests in the trustee as part of the bankrupt’s estate; and, except against a purchaser in good faith, for value and without notice of the bankruptcy, the trustee’s title to that tenancy has relation back to the commencement of the bankruptcy.
Text in force at .
Source: legislation.gov.uk — The National Archives (legislation.gov.uk), reproduced under licence Open Government Licence v3.0.
What it actually says
This provision inserts new subsections into the Insolvency Act 1986 to exclude certain residential tenancies from the bankrupt's estate. The excluded tenancies are those that cannot be assigned freely: assured tenancies or assured agricultural occupancies under Part I of the Housing Act 1988 whose terms inhibit assignment as in section 127(5) of the Rent Act 1977; protected tenancies under the Rent Act 1977 where no premium can be required for assignment; protected occupancies under the Rent (Agriculture) Act 1976 with similar assignment inhibition; and secure tenancies under Part IV of the Housing Act 1985 that are not capable of assignment except in cases mentioned in section 91(3) of that Act.
However, the trustee in bankruptcy can serve a written notice on the bankrupt under new section 308A (inserted by this provision) to vest that tenancy in the trustee as part of the bankrupt's estate. The trustee's title then relates back to the commencement of the bankruptcy, except against a purchaser in good faith, for value and without notice of the bankruptcy. This means the exclusion is not absolute; the trustee can choose to bring the tenancy into the estate.
When it applies
- A bankrupt tenant has an assured shorthold tenancy with a clause prohibiting assignment; the trustee cannot automatically take it but may serve notice to vest it.
- A protected tenant under the Rent Act 1977 whose tenancy cannot be assigned with a premium; the tenancy is excluded from the estate unless the trustee acts.
- A secure tenant of a local authority who becomes bankrupt; the tenancy is excluded if it is not capable of assignment (except in certain cases like exchange).
- An assured agricultural occupancy where the terms forbid assignment; the tenancy is excluded initially.
- A tenant under the Rent (Agriculture) Act 1976 who is a protected occupier with assignment inhibition; same treatment.
What this section does not say
- People may think all tenancies are excluded from the bankrupt's estate, but only those meeting the specific conditions (no premium, assignment inhibition) are covered.
- The provision does not apply to commercial tenancies or tenancies that allow free assignment.
- The provision does not automatically protect the tenancy from the trustee; the trustee can override the exclusion by serving notice.
- The provision does not apply in Scotland (see s. 118 for the Scottish equivalent).
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This page reproduces the text of HA 1988 s. 117 in force at the date shown and explains it in general terms. It is not legal advice and takes no account of the circumstances of your case, which can change the answer completely. For a live dispute, for limitation periods, and before taking any step in court, consult a qualified lawyer in England and Wales.