Commercial landlords historically found themselves in a difficult position when their company tenants went into administration. Many landlords had found tenant companies entering administration on the day immediately following a quarter day, thus avoiding liability to pay rent even where the administrators continue to trade from the premises.
Court rulings had left landlords in an unenviable position. However earlier this year, the Court of Appeal delivered a unanimous judgment clarifying the obligations on the part of administrators to pay rent to a landlord. The case of Pillar Denton Ltd and Ors v Jervis & Ors  EWCA Civ confirmed that the rent, accruing during a period where the administrator continues to use the premises for the purposes of the administration, is to be treated as an expense of the administration irrespective of the date upon which the rent fell due.
The impact of this is that rent will therefore be calculated on a daily basis for the period in which the administrator uses the premises. The encouraging outcome from this ruling is that Landlords will now be paid their rent as a priority ahead of other provable debts thereby increasing their chances of recovering their rent payments.
Further litigation is likely to continue but, for the time being, there is at last some protection for commercial landlords.
I represent many commercial landlords, some of which have had some tricky situations occur where their company tenants have gone into administration and they have been left with huge unpaid rents. I am pleased that I now have some recourse to advise my clients on, in terms of some level of protection which will secure their right to still earn rental income on their property during a tenant’s administration process.
If you find yourself in a position where your company tenant has gone into administration and you aren’t sure where you stand in your particular situation – please comment below, tweet me on @SarahJCanning, email me or give me a call on 01604 828 282.