Commercial landlords often face difficulties in dealing with Administrators and their properties however there may be a way to improve the position.
The legal case of Leisure (Norwich) II Ltd –v- Luminar Lava Ignite Limited (in administration) confirmed that Administrators are not liable for the payment of rents payable in advance which fall due prior to the date of Administration.
Administrations are designed to create a breathing space for corporate entities in difficulty. Administration creates a moratorium under which creditors are unable to take action against a company for non-payment and landlords are unable to implement the usual forfeiture provisions contained in leases for non-payment of rent without leave of the court or consent of the Administrator.
Economic conditions have put huge pressure on both institutional landlords and private landlords alike.
It is settled law that should an Administrator wish to continue to trade from the whole or part of the premises following his appointment, then the Administrator is under an obligation to pay rent for that period as an expense of the Administration.
The decision in Leisure (Norwich) II Ltd –v- Luminar Lava Ignite Ltd confirmed that when rent falls due prior to the appointment of an Administrator that rent cannot be recovered as an administration expense nor an apportionment of it for the period from the date of Administration until the next rental payment date.
It was held that Common Law Apportionment Act 1870 does not allow for rent payable in advance to be so apportioned.
Given the current economic climate, it is advisable for landlords to consider whether they should look to negotiate monthly rental payments in place of quarterly in advance payments on the usual quarter days, as is still very common, to limit their exposure if the worst should happen.
Should you have any questions or queries concerning this article or any aspect of the law regarding you business or property please contact Frances Watts our Commercial Property team on frances@thpsolicitors.co.uk or 0118 975 6622.
