In December’s Real Estate Update, insolvency Partner Vivien Tyrell considered a landlord’s ability to forfeit a lease where the tenant is in administration. Closely linked to this is a landlord’s ability to recover rent from a tenant which is in administration and the recent decision in Goldacre (Offices) Limited v Nortel Networks UK Limited (in administration) will be welcomed by landlords everywhere.
In Goldacre, the High Court has conf rmed that rent will usually be classed as an expense of the administration. So if a tenant goes into administration and the administrator causes the insolvent company to use the premises for the benef t of its creditors, the administrator must pay the whole of the rent that falls due, as an expense of the administration. The company does not have to be trading from the premises or even occupying the whole of them – in Goldacre the administrator was only using a small part of the property from which to run the administration.
The signif cance of this is that it places the landlord much nearer the front of the administrator’s queue – apart from secured creditors and those with a proprietary claims to the company’s assets, the administrator must pay the expenses before paying anyone else. Whilst there is still no guarantee that the rent will be paid on time – or at all, as this will obviously depend on the assets available for distribution and the claims of any secured creditors – this case certainly puts landlords in a stronger position. From now on, administrators will have to consider the cost of paying rent at the outset, rather than just waiting for the landlord to demand the rent and/or take enforcement action.