Expert welcomes game-changing Court of Appeal ruling
28th February, 2014
A ruling that clarifies the liability of companies in administration and liquidation to pay rent in respect of properties that they continue to occupy during the administration or liquidation has been welcomed by insolvency solicitor Nick Clarke.
The Court of Appeal has ruled, in the context of the insolvency of the retailer Game, that rent is payable as an expense of the liquidation or administration where the company continues to occupy rented premises after it has gone into administration or liquidation.
The decision overrules the previous authority on this issue which effectively enabled companies to have a rent free period while in administration or liquidation if the administration or liquidation commenced after the rent for the period had fallen due. Now companies in administration or liquidation must still pay rent if they continue to occupy premises after they have gone into administration or liquidation.
Nick Clarke, a partner at leading Cheshire law firm Aaron & Partners LLP, has welcomed the ruling which provides obvious benefits to landlords.
Nick said: “The decision of the Court of Appeal in the “Game” case brings clarity to the issue of what rent an administrator or liquidator is required to pay in respect of the use of rented property for the purpose of the administration or liquidation.
“The Court decided that rent should be paid as an expense of the liquidation or administration at the rate provided for in the lease for the period in which the property is occupied for the purpose of the liquidation or administration. The rent is calculated on a daily pro rata basis.
“Before this judgment, if a company went into administration the day after the rent for the next period had fallen due, even if the rent had not been paid, the administrator could continue to use the property without paying rent until the next rent installment fell due.
“This gave rise to companies picking their date to enter administration so as to take advantage of this effectively rent free period of trading.
“The “Game” decision is clear and in addition to removing the potential unfairness for landlords also leaves insolvency practitioners and landlords alike knowing where they stand.”
The corporate and commercial team at Aaron & Partners LLP, which has offices in Chester, Manchester and Shrewsbury, was recommended in the elite top tier in the industry-defining North West Legal 500 guide.
Aaron & Partners employs more than 100 people and has offices in Chester, Manchester and Shrewsbury, and received glowing reviews in the prestigious Chambers and Partners UK 2014 rankings.
For more information please contact Nick Clarke on 01244 405558 or email [email protected]
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