Administrators beware - post administration rent is an expense
Date: Monday 18th January, 2010
Author: Chris Laughton
Profile: Chris Laughton
Not only is rent an administration expense, but it is payable on the terms of the lease. Having the company occupy only part of the premises on a quarter day will in most cases trigger an administration expense liability for the whole of the next quarter's rent, payable immediately.
This results from the decision in Goldacre (Offices) Ltd v Nortel Networks UK Ltd  EWHC 3389 (Ch) (07 December 2009), where HHJ Purle QC applied the Lundy Granite or liquidation expense principle to administrations in light of the similarlity of wording between Insolvency Rules 4.218 and 2.67.
In February 2009 we postulated, following Innovate Logistics Ltd v Sunberry Properties Ltd  EWCA Civ 1321 (18 November 2008), that the administrator and the landlord would have to consider the balancing exercise that the court would undertake between the financial loss to the landlord and the financial loss to the creditors generally. The pendulum has now swung firmly in favour of landlords.
Keywords: rent 'administration expense' landlord lease 'quarter day' Goldacre Nortel Innovate 'Lundy Granite' Purle 'Insolvency Rules'
Please note that the opinions expressed in this blog represent the views of the author and not the views of Mercer & Hole.