The much talked about decisions of the High Court in the Goldacre and Luminar cases in relation to rent payable when the tenant is in administration have recently been followed by another High Court decision in Games Station Limited & others. Companies in the Game Group plc went into administration with numerous outlets on lease. The administrators applied to court for directions and the court ordered that the arrears of rent falling due before the date of the administration were not payable as an expense in the administration. These arrears of rent amounted to unsecured claims. However, all rent falling due during the course of the administration was payable as an administration expense.

The landlords were given leave to appeal to the Court of Appeal on the first point. The buyers of the business in occupation of premises under licence from the administrators were given leave to appeal on the second point. The administrators were appointed on 26 March 2012 – the date after the rent payment under the leases which under which rent is payable quarterly in advance. This will be an opportunity to clarify this important issue regarding payment of rent, which has been in question ever since the Goldacre decision in 2009. For landlords it makes a world of difference to be paid rent as an administration expense – which means the rent is payable in full and immediately – as opposed to having an unsecured claim which ranks only for a dividend with other unsecured creditors and is usually paid months or years after it fell due.

For further information please contact Richard Baines, Partner, of Druces LLP’s Business Turnaround, Restructuring and Insolvency team.