The Court of Appeal has decided that rent accruing during a period of administration should be treated as an expense of the administration, irrespective of the date on which it falls due for payment. Administration expenses are paid by administrators in priority to liabilities owed to holders of security.

Comfort letters can be a useful tool for providing an assurance of support from a parent to a subsidiary company. In some cases they help inform the decision of the board of a subsidiary and its continuing trade. It's possible for such letters to form binding obligations in law, if carefully considered and drafted.

Key points

• The High Court has ruled that, where a tenant goes into administration, rent which is payable in advance and falls due before the commencement of the administration is not recoverable by the landlord as an administration expense
• Landlords must take their place with other unsecured creditors in relation to sums payable before the appointment of administrators, even if they relate to a period during which the administrators had use of the property

Background