Commercial landlords are celebrating a recent Court of Appeal ruling that brings common sense to rent payments from companies in administration.
Bradys’ commercial and mixed use specialists interpret the changes.
The Court of Appeal ruling followed an application by a group of landlords who were facing substantial unpaid rent following the collapse of computer game retailer Game.
The Court ruled that rent must now be paid on a ‘pay as you trade’ basis, meaning that rent for any period of occupation during an administration will now be brought into the overall administration expenses pot.
Under the old system, a commercial tenant filing for administration just one day after the quarter day payment is due could legally avoid paying the rent but still occupy the premises.. at the cost of course to the landlord.
And, on the flip-side, if a struggling company filed for administration on or before rent day, administrators were often forced to close the business, giving it – and its employees – no chance of recovery.
This new ‘pay as you trade’ system brings fairness for the landlord whilst giving a struggling company the best chance of finding a buyer and trading out of difficulty.
Permission to appeal has already been sought from the Supreme Court so the decision may ultimately be overturned. In the meantime however, we believe it will discourage companies from making tactical administrations just after quarter day and effectively operating rent-free.
Bradys will keep you updated if and when the case progresses to the Supreme Court.