Finally the long awaited judgment in the GAME case has been handed down.
A group of commercial landlords took action following the collapse of digital game retailer, GAME, to seek payment of rent for the period the administrators had used the various retail premises.
The Court of Appeal determined that where an administrator uses commercial leasehold premises that rent is payable as an expense of the administration.
Prior to the judgment in the GAME case, if a company entered into administration the day after the quarter’s rent became due then the administrator could use the property for the remainder of the quarter without having to pay rent to the landlord. The landlord would have to claim its outstanding rent as part of the administration, and due and payable as a secured creditor. Often where there were insufficient assets in the administration, the premises would be closed before the end of the quarter period ensuring that rent payments did not become an expense payable in the administration.
The ruling that rent is now payable as an expense of the administration means that rent will be paid ahead of any creditors. The rent payable is determined by the period in which the property is used, and is accrued from day to day.
The impact of the decision for administrations and failed businesses remains to be seen, but undoubtedly this will be welcome news for commercial landlords.
Louise Hebborn, property litigation solicitor and partner