“Pay as you go” rent in administration

The Court of Appeal in the case of Pillar Denton Limited & Ors v Jervis & Ors [2014] EWCA Civ 180 has ruled that rent will be payable as an expense of a winding up or administration regardless of when it falls due for payment.

This ruling has brought welcome clarity and relief for landlords as to when rent qualifies as an administration expense. It is significant for landlords because rent treated as an expense of the administration will rank in priority to other unsecured creditors (who have to prove for their debts in administration).

Following the cases of Goldacre (Offices) Limited v Nortel Networks UK Limited (in administration) [2009] and Leisure (Norwich) II Limited v Luminar Lava Ignite Limited [2012], rent which fell due on the quarter day before the appointment of administrators would not be payable as an administration expense, even if the administrators retained possession of the property for the purpose of the administration. This led to an unwelcome trend for landlords of administrators being appointed the day after the quarter day, thereby effectively securing a rent free administration.

For more information, contact Nicola Stewart or Aaron Heslop

 

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