Rent as an expense of the administration

The Court of Appeal has delivered its judgment in the eagerly anticipated Game administration on the treatment of rent payable under a lease held by a corporate tenant that enters administration. When is the rent no more than a provable debt; and when does it rank as an expense of the administration?

The position prior to the Court of Appeal decision on 24 February was following Goldacre and Luminar that rent payable in advance and that fell due before the appointment of an administrator was not considered an expense of the administration, but where the rent fell due during a period when the administrator was occupying the property for the purposes of the administration, then the whole sum ranked as an administration expense. 

In the Game administration, the Game group had gone into administration the day after the March quarter day. Rent was payable in advance under various leases. The administrators did not pay rent for the remainder of the quarter notwithstanding their occupation of the premises. Applying Goldacre and Luminar, the High Court ordered that the arrears of rent falling due before the date of the administration were not an administration expense and ranked as unsecured claims while the rent falling due during the course of the administration was payable as an administration expense…

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