Administrators and liquidators of leasehold property now have to pay rent for the period during which the property is used.

The Court of Appeal has recently handed down judgment in the case of Jervis v Pillar Denton; re Games Station in which it has overturned the leading cases of Goldacre (Offices) Limited v Nortel Network UK Limited [2011] CH 455 and Leisure (Norwich) II Limited v Luminar Lava Ignite Limited [2013] 3WLR 1132.

This means that liquidators and administrators can no longer rely on the previous interpretation that payment of rent only becomes due from the quarter date after their appointment.  This means they can no longer avoid paying rent for a quarter if the administration/liquidation commenced shortly after a quarter date.

In this case, The Game Group went into administration on 26 March 2012, the day after the March quarter day.  The March quarter’s rent had not been paid and the administrators refused to pay any part of it even though they continued to use the stores for the benefit of the administration thoughout the quarter.

Lewison LJ confirmed that the salvage principle applies to ensure that the rent payable under a lease relates to the period of actual use of the premises for the purposes of the administration and as such it is treated as if it were a debt incurred by the administrators and is payable as an expense of the administration.

Please contact Joanna Osborne if you have any questions in relation to this judgment.

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