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administrators’ liability for rent

24 February 2014

The Court of Appeal has overturned the rule that administrators are not liable to pay any rent that falls due prior to their appointment, even though they continue to use premises for the purposes of the administration.

Game Station Ltd (‘Game’) went into administration on 26 March 2012, without paying the quarter’s rent due on 25 March. A week later, a number of the stores were sold by the administrators to a new Game company. The effect of the Court of Appeal’s decision is that the administrators will have to pay the March quarter’s rent as an expense of the administration for those properties sold to the new Game company.

This dose of much needed common sense will be welcomed by landlords since, under the previous law, administrators had been able to gain a quarter’s rent free by timing their appointment to take effect just after a rent payment date.

The Supreme Court may well though have the final say in the matter.

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