The recent English court decision in Goldacre (Offices) Limited v Nortel Networks UK Limited (in administration) [2009] EWCH 3389 (Ch) may be controversial and raises thorny practical issues, especially in relation to the restructurings of retail businesses.   

This is the first of several posts on gathering agreements in bankruptcy, covenants running with the land and rejection claims that arise when a debtor finds gathering agreements financially burdensome. As our readers know, we waited with much anticipation for theSabine ruling and wait with equal anticipation for the ruling on similar issues in QuickSilver.  Being pragmatic business lawyers we decided to blog on what parties to gathering agreements should be doing now in light of the non-binding, advisory Sabine ruling.

In the event of a tenant becoming insolvent, it is clearly important for a landlord to know where rent payable ranks in administration. A recent landmark decision handed down by the High Court strengthens the position of landlords by deciding that rent can now be more widely payable as an expense of the administrator.

Background

Simply, if rent is ranked as an expense of the administration1 then it is almost always discharged in full as a mandatory expense of the administrator, rather than being placed with lower priority creditors.

Last week, we discussed the complexities of metals exploration chapter 11 bankruptcy cases and addressed several of the notable issues that arise in those cases. The discussion of significant issues continues below.

On 1 April 2008 The Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008 (Regulations) came into force. The Regulations extend the exclusion from the obligation to pay rates in respect of unoccupied non-domestic rates to those premises where the owner (or lessee, being a person entitled to possession) is a company in administration pursuant to Schedule B1 Insolvency Act 1986 or is subject to an administration order under the former administration provisions.

The pandemic and various lockdowns have been tough on the landlord community. The last few days have not made that any easier. First, the New Look decision dismissed the challenge mounted by a number of landlords (see our blog here ). Then on 12 May 2021 the landlord community was dealt another blow by the outcome of the restructuring plan (“RP”) in Virgin Active.

Carpetright, the UK flooring company, has announced that it is considering a Company Voluntary Arrangement with the aim of “rationalising the company’s property portfolio in order to improve the long-term prospects of the business”. This is expected to enable the business to close unprofitable shops and reduce their rent bill. With 409 shops across the country, any proposed CVA is going to have a significant impact on landlords.

Increasing pressures placed on those operating in the retail and hospitality sectors as a result of COVID-19, means there is likely to be an increasing use of CVAs in these sectors. The intention would be to help support and restructure businesses in distress, but could retailers use a CVA as a mechanism to re-write the terms of its leases?

As more and more states pass laws allowing the sale of marijuana, whether for medicinal or recreational purposes, investors will try to claim their share of what is certainly going to be a lucrative market. However, even in a growing market, private enterprises fail or need restructuring. This raises the question of whether distressed marijuana businesses, and those doing business with marijuana businesses, can seek relief under the Bankruptcy Code.

The UK Government has announced that the temporary prohibition on forfeiture will be extended when the current prohibition comes to an end at the end of the year. The restriction, that prevents commercial landlords from forfeiting a lease for non-payment, will now be in place until 31 March 2021.