MacRoberts Corporate Recovery e-update 20/01/10
RENT AS AN EXPENSE OF THE ADMINISTRATION
Administrators of tenant companies in England and Scotland have for some time taken the view that, for as long as they are making use of the leased premises, they have to pay rent to the landlord, albeit almost always not in the manner required by the lease. For example, the administrator will offer to pay weekly or monthly in arrears, not quarterly in advance.
Sometimes the rent is actually paid at the time, in other cases an undertaking is given that the rent will be paid later.
In either event, the precise treatment of the payments is not relevant to the landlord - what matters is that the rent is paid.
However, in the event that an administrator should try to get away with not paying rent, the recent English High Court case of Goldacre (Offices) Limited -v- Nortel Networks UK Limited (in administration) is authority for the rule that the rent in these circumstances is to be treated as an expense of the administration.
The court took the view that there was already a rule to this effect in English liquidations and that, on an interpretation of English Insolvency Rules, the same rule should apply to administrations.
In Scotland, the law in this area is undeveloped and there are different Insolvency Rules. However, the language of the respective Rules (Rule 2.67(1)(a) and (f) of the English Rules and Rule 4.67(1)(a) of the Scottish Insolvency Rules) is very similar and it would be unfortunate if a court in Scotland reached a different conclusion to that now established in England and Wales.
Landlords and administrators/liquidators of commercial premises in Scotland should also remember the effect of landlord's hypothec in relation to arrears of rent arising after appointment of the relevant insolvency practitioner.
MacRoberts offers advice on all aspects of insolvency and commercial property. For further information, please contact Alan Meek or Ian Bowie on 0141 332 9988.
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