The Court of Appeal has given its judgment in the Game Station case. It changes the way that rent is treated in administration.
The decision to put the Game Group of companies into administration on 26 March 2012 (the day after the quarter day) was not a date chosen at random. It was a date that was very specifically identified because £10,000,000 in rent had become due on the previous day.
Previous cases had decided that if the quarter’s rent fell due after a company had entered administration then the whole quarter’s rent was payable as an administration expense irrespective of how long the company continued to occupy the premises. However if the quarter’s rent fell due before the administration then it was not payable as an administration expense even if the administrators retained possession. As a result companies frequently entered into administration on the day immediately after a quarter day and avoided the liability to pay rent even though they continued in occupation of the premises.
The decision in the Game Station Case (on 24 February 2014) overruled the earlier cases. An administrator must now pay rent as an administration expense for the period during which the premises are occupied for the benefit of the administration. The rent is payable at the rate payable under the lease and accrues from day to day.
This is a practical and common sense decision from the Court of Appeal. In the more recent Phones 4U collapse, the rent payable by the administrators will be for the period they occupy premises.
Disclaimer: While we do all that is possible in terms of ensuring its accuracy, this blog contains general information only. Nothing in these pages constitutes legal advice. You need to consult a suitably qualified lawyer from the firm on any specific legal problem or matter.
[Originally published in February 2014. Updated September 2014.]