50 commercial property
Tenant insolvency and effects on the landlord
Judith Rountree, solicitor at Gardner Leader Solicitors in Newbury, considers company administration and issues around this
A sign of the times for the High Street up and down the country is that more and more companies/retailers are resorting to administration. Such companies are invariably tenants of leased property and due to financial difficulties may already be in rent arrears. As a result, this is likely to adversely affect commercial landlords.
Within a recent case, Leisure Norwich (II) and others v. Luminar Lava Ignite and others [2012] EWHC 951 (Luminar case) the High Court has clarified whether an insolvent company’s liability to pay rent arrears will rank as an expense of its administration.
A previous High Court decision in 2009, Goldacre v. Nortel Networks, confirmed that once a company had gone into administration, often the purpose of administration can
only be achieved if the company is able to remain in occupation of its premises in order to further the interests of creditors. As such, all rents due under the lease during the insolvency process are ranked as an administration expense, paid to the landlord. This case raised the question of whether rent arrears due before the company entered into administration could rank as an expense.
The court held within the Luminar case that when rent is payable in advance and falls due for payment prior to the commencement of the administration, it is not payable as an administration expense, the landlord must join the list of creditors, some of whom will rank priority. This principle applies even if the leased property is retained for the purpose of administration. Furthermore,
the above means that if the administrators are appointed after a quarter rent day when the tenant has defaulted, the administrators may enjoy the remainder of the quarter rent-free.
Although the above decision is not in the favour of landlords, it should serve as a warning:
• If a tenant is experiencing financial problems, this may result in rent arrears and subsequent insolvency.
• If a tenant fails to pay rent on a quarter day, a landlord should act swiftly to obtain payment of the debt, or security as to when/how the debt will be paid. Failure to take prompt enforcement action against the tenant may mean (if insolvency occurs) the landlord will join the creditor queue.
Boot camp comes to Milton Park
Boot Camp at Milton Park, near Abingdon, has officially launched, using the large area created by the demolition of building 182 last year.
Andrew Barlow, commercial director at MEPC Milton Park said: “We are committed to the wellbeing of all our customers and using the outdoor space at 182 for Boot Camp, is another example of how we try to promote a healthy living here at Milton Park.
"We often see people jogging along our roads and we are even having a sporting theme to our summer party this year. I hope that more people will become involved in Boot Camp and that it continues to be a great success.”
The high intensity extreme workout is a 45-minute cardio exercise routine run by the personal trainers from the Park Club that runs every Thursday between 12.30 and 13.15. With
www.businessmag.co.uk THE BUSINESS MAGAZINE – THAMES VALLEY – OCTOBER 2012
the use of dumb bells, tyres and skipping ropes, the circuit makes use of the outdoor space where the building used to stand.
Neil Morris, general manager of
the Park Club, said: “Although Boot Camp is an extreme cardio workout, it still allows those taking part to work at their own pace. Our personal trainers have years of experience in getting people
• If the tenant does become insolvent, the landlord will then need to obtain permission from the administrator or the court to take enforcement action for payment of the debt.
• The landlord may consider forfeiting the lease. However to do so may require permission from the administrator or the court.
To discuss any of the issues raised in more detail, contact Judith Rountree , details below.
Details: 01635-508080
j.rountree@
gardner-leader.co.uk
motivated during their workout. This class is perfect for those who want a quick fitness class to fit into their lunch break that gives a full body workout.”
Boot Camp is free for all Park Club members and is open to non-Park Club members at a charge.
Details:
www.parkclub.co.uk
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