Judgment in the Court of Appeal case of Pillar Denton v Game Retail- about rent due during the administration of Game was handed down yesterday. It is a landmark ruling for administrators, on the thorny issue of the payment of rent during the period of the tenant's administration.
Up to now, we have been applying the ruling in the Goldacre and Luminar cases that we have posted on previously. The results of these cases created the trend of administrators being appointed just after the rent quarter day. The reason for that was that the cases decided that for rents due in advance, the whole quarter's rent could not be apportioned and so, where an administrator goes into occupation of premises for the purposes of the administration after the quarter's rent has fallen due, the rent due for the period of the occupation up to the next quarter day cannot be recoverable as an expense of the administration, but only as an unsecured debt in the administration. By having to prove alongside all other unsecured creditors, landlords were likely to recover very little even though the premises were in use.
Both these cases have now been overruled by the Game decision, so that, where an administrator (or liquidator) makes use of property for the purposes of the administration (or winding up), from whatever date, rent will be payable as an expense for the period during which the property is so used, and will be treated as accruing from day to day, whether the rent is payable in arrears or in advance.
In the Game case, the judge concluded that the rent payable under a lease for the period of use for the purposes of the administration is to be treated as if it were a debt incurred by the administrator and so is payable as an expense. He also found that it was incorrect that in this situation rent could not be apportioned.
This decision will have an impact on administrations. We expect that there will be less focus on strategic timing of the appointment of administrators, but, in reality, the current law has essentially reverted to the established pre-Goldacre position. The Game decision represents a return to familiar territory for administrators, paying for the period of their occupation as an expense of the administration. Landlord's will not get a full quarter's rent if the administrator is in occupation on the quarter day but leaves the premises during the quarter and they won't suffer the loss of rent where an administrator is in occupation during the quarter but not on the quarter day itself.
However we see in the press that an appeal is being considered by Game's administrators so we do not yet have complete certainty on the issue.
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