Law firm BLP acted for the landlords and BLP real estates disputes partner Michael Metliss said: “This decision is a landmark one and should bring welcome clarity to what has become a contentious area of law in recent years. The landlord community will welcome the decision, knowing that they will receive payment for the use of their property by companies in administration.”
On 26 March 2013, a number of companies in the Game Group entered into administration. On the previous day, the March quarter day, rent and service charges became payable under the group’s occupational leases. The administrators did not pay those sums as administration expenses, even though the companies continued to trade from many of the retail stores throughout the remainder of the quarter. In doing so, they relied on a High Court decision in an earlier administration case, that companies in administration were not liable to pay as administration expenses sums that became payable before an administration starts. The affected landlords would be denied priority, and have to claim those sums as unsecured creditors.
The decision will mean rents and service charges will now be payable as administration expenses while a lease is used for the benefit of an administration, even when they became due pre-administration. Much like utilities, they will be paid for each day that properties are occupied.
Administrators will also now have certainty of the rental liabilities that they will be required to pay, if they make use of leased properties.