firm news

Russell May
Russell May,
Administrators required to pay rent “as they go”
09 January 2015

In February 2014 the Court of Appeal’s decision in the case of Game Retail Ltd v Pillar Denton Ltd and others significantly changed the law in respect of an administrator’s liability to pay rent to a Landlord for premises.

This decision significantly improved the rights of landlords and reversed the High Court cases of Goldacre and Luminar, which allowed administrators to use leased property effectively rent free for up to 3 months, by timing their appointment appropriately, i.e just after a quarterly rent payment date.

Now, administrators of a limited company are liable to pay rent to the company’s landlords for the period for which the administrators use the property, even if they do not use the property for the whole period covered by the rent. They effectively have to “pay as they go,” irrespective of the dates for payment of rent under the Lease.

This decision struck a fair balance between the rights of administrators who are clearly trying to turn the company around and to achieve the best outcome for all creditors, and Landlords, who are obliged to continue their legal relationship with a company in administration, unlike most other creditors.

Nevertheless, Game Retail Limited, which purchased the business of the Game Group from the administrators, sought permission from the Supreme Court to appeal the Court of Appeal’s decision.

The Supreme Court has recently confirmed that the application for permission to appeal has been refused.

The Court stated that “permission to appeal be refused because the application does not raise an arguable point of law of general public importance which ought to be considered by the Supreme Court at this time bearing in mind that the case has already been the subject of judicial decision and reviewed on appeal.”

The settled position is therefore that, if an administrator wishes to continue to use premises for the purpose of the insolvency process and while it is continuing, he will have to pay rent to the landlords of those premises for the period of their occupation, and that rent will be payable in preference to the claims of other creditors.

For further information or advice contact the Boyes Turner housing team on 0118 959 7711 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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