Where the mortgagee has preference (usually the bank) - it could happen that the Trustee must sell the property “free of the lease” if the proceeds do not cover the debt but the Trustee will first put the property up for sale “subject to the lease” [Practical note: Property Auctions] and the Trustee has the authority to cancel the lease in which case the lessee will have a concurrent claim for damages against the insolvent estate. 6.2 Insolvency of the Lessee: • The insolvency of the lessee does not in itself terminate a lease – it gives rise to a situation requiring the trustee to exercise his discretion: (i) He may cause the lease to continue for its agreed term by notifying the lessor accordingly; (ii) if he desires to bring it to an end he may either notify the lessor in writing or merely refrain from doing so, in which case the lease terminates THREE MONTHS after the date of the trustee’s appointment .
(ii) Section 37(2) = in the event that the trustee provides no notification after 3 months of his appointment then it is deemed that the lease has been terminated. (ii) Section 37(1) = The lessor may claim compensation from the estate for any loss suffered due to non-performance by the lessee; and (ii) Section 37(4) = The Trustee may not claim compensation for any improvements that the lessee has made to the property if he decides to terminate the lease. (ii) Section 37(3) = Rent due from the date of sequestration to the date of termination of the lease must be included in the sequestration costs. (ii) Section 37(5) = States that a term of the lease which prohibits the transfer of any right under the lease or which provides for termination through the death of the lessee binds the trustee of the insolvent estate, as if he were the lessee or executor of the estate. 6. BY INSOLVENCY: (Continued) 6. BY INSOLVENCY: END OF UNIT 5
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- Fall '18
- TERMINATION OF LEASE