Commercial landlords will be familiar with the practice that has grown up since the 2010 case of Goldacre of putting companies into administration immediately following a quarter day. By adopting this tactic, administrators have been able to avoid paying rent as an administration expense until the next quarter day while continuing to use the premises for the benefit of the administration.
The recent Court of Appeal decision in the Game Station case has established that administrators should pay rent on a daily basis while they are using the property. This overturns the earlier High Court decisions in the Luminar and Goldacre cases and is in keeping with the recent trend of flexibility and fairness in insolvency situations.
Leasehold property in an administration
Bristol Alliance Nominee No 1 Ltd v Bennett [2013] EWCA Civ 1626; [2013]PLSCS 316 (A/Wear UK Limited)
Background
The case relates to the insolvency of a women’s fashion retailer and their shops in Bristol and Leicester.
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.
In our e-updates of 20 January 2010 and 16 August 2010, we looked at decisions of the English and Scottish courts from December 2009 and August 2010 in which it was decided that, in England and Scotland respectively, the Administrators of a tenant company are bound to account to the landlord of premises for rent due in relation to the period during which those premises are being u
The Court of Appeal today overturned existing rules on when administrators have to pay rents falling due before their appointment. The Court ruled that rent payable in advance can be treated as an administration expense such that administrators cannot avoid paying rent payable in advance that falls due before the date on which the administrator is appointed.
The case concerning the Game group of companies' administration has now been played out in the Court of Appeal and the eagerly anticipated judgment has been handed down.
The issue at stake concerned a landlord's ability to recover rent as an expense of administration (and therefore payable before other creditors) where such rent is payable in advance but where the tenant's administration occurs immediately before a quarter day's rent falling due.
The Court of Appeal delivered judgment on Monday morning in the much anticipated appeal in Jervis & Others v Pillar Denton & Others on the treatment of rent payable under a lease held by a corporate tenant that enters administration. The case involved the Game Administration.
Key points