Administration – when is rent recoverable?

January 25, 2013

With the recent news that Jessops, HMV and Blockbuster have gone into administration many landlords may once again find themselves concerned about their position in respect of rents payable under leases in the case of a tenant in administration.

As reported in previous articles (Rent during an administration? and A blow for Landlords? Pre-administration rent not a cost of administration) the well published cases of Goldacre (Offices) Limited v Nortel Networks UK Limited (2010) and Leisure (Norwich) II Limited v Luminar Lava Ignite Limited (2012) made it clear that administrators must pay all rents falling due in relation to leasehold premises being used for the benefit of creditors as an expense of administration but are not liable for any rental payment due prior to the appointment of the administrator.

In the cases of Jessops, HMV and Blockbuster, where the companies have continued to trade, this means landlords will be able to demand  rents due under the relevant leases. However where arrears existed prior to administration or where the company has ceased to trade landlords will be ranked as unsecured creditors leaving them in the difficult position of considering whether to forfeit or surrender a lease and take on all the obligations that come with a vacant premises. 





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