Wednesday, 3 July 2013

Game Changer - Administration Rent Dispute Fast-Tracked

Landlords seeking to recover millions of pounds of unpaid rent from the administrators of Game are to have their case fast-tracked to the Court of Appeal.

The Estates Gazette reports that High Court deputy judge Nicholas Lavender QC has ruled that as the law currently stands the quarter's rent at stake across a portfolio of stores is not an administration expense because it fell due before the group went into administration.

However, he granted the landlords permission to appeal to the Court of Appeal as quickly as possible.

Last year the High Court ruled that where a company goes into administration, unpaid rent which fell due before the appointment of the administrators will be an unsecured claim against the company and not an expense of the administration, even if the administrators continue to use the property.

There’s little chance of a landlord being able to recover all or even any of an unsecured claim.

So if the rent is paid quarterly and administrators are appointed the day after the quarter day, then no rent is payable as an expense of the administration until the next quarter day – effectively giving the administrators a free quarter’s trading.

Ironically, there's a reduced risk if the tenant pays its rent monthly.

However, the flip-side of last year's decisions is that if the administrator goes in the day before the quarter day and leaves two days later, he has to pay the full quarter - which seems unfair too.

The Court of Appeal will now be asked to overturn earlier decisions and rule that rent for the disputed quarter is payable as an administration expense, which would make it payable in priority to other debts, so making it more likely that the landlords will ultimately recover the full sum.

Will the court decide to revert to the old "pay-as-you-go" approach that seemed to apply before last year's rulings?

Photo by clry2 via Flickr

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