Rent during an administration?

In the recent case of Goldacre (Offices) Limited v Nortel Networks Limited (In Administration), the High Court clarified the position with regard to the payment of rent by a tenant company in administration.

The Court held that so long as the administrators were keeping possession of or using part of the premises for the purposes of the administration, the administrator must pay the full rent as it falls due as an expense of the administration.

Before this decision, the approach in practice was to treat each case for payment of rent on its own merits and to balance the interests of the landlord against the interests of creditors of the tenant company. Now administrators must assume that if they use the premises, the rent must rank as an expense of the administration.

The downside for landlords, is if the administrator cannot fund the payment of rent, he may vacate thus leaving the landlord with no rental income and a vacant property.