The next chapter in the Game litigation and rent as an expense of the administration

In contrast to non-solvency non-payment of rent, where the landlord is entitled to recover the whole quarter’s rent payable in advance whether or not the forfeiture occurred before the quarter ended, in insolvency situations the landlord must prove for rent he is owed.

In 2009, the Goldacre case decided that where administrators continued to trade for the benefit of the company’s creditors from the premises on a rent payment date, the whole of the rent for that period was payable as an expense of the administration, even if the administrators vacated the premises before the next payment date. Landlords welcomed the decision given the growing number of administrations where the administrators continue trading from premises pending a sale to sell off remaining stock.

In the later case of Norwich v Luminar Lava, the High Court held that rent payable in advance, which fell due before the commencement of an administration, was not payable as an administration expense even if the administrator stayed in possession of the premises for the purposes of the administration. Instead, the landlord would have to prove for the unpaid rent as an unsecured creditor. Luminar distinguished Goldacre and restricted expenses of the insolvency process to those that were incurred after the commencement of the process. It led to unsatisfactory situations where administrators could make tactical decisions to enjoy the remainder of a quarter in rent-free occupation of the premises if they timed the appointment after the quarter day…

Click on the link below to read the rest of the Walker Morris briefing.

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