Landlords and Administrators: A Shift in the Balance of Power?

    April 2010

    “In the decision of Goldacre (Office) Ltd v Nortel Networks UK Ltd (In Administration), the court has held that an administrator was liable to pay in advance a full quarter's rent contractually due under a commercial lease as an expense of the administration pursuant to Insolvency Rule (IR) 2.67, notwithstanding that the administrators were only occupying a small part of the premises, the majority of which were sublet or unoccupied. Further, the court held that the administrators would remain liable for so long as the administrators retained the use of any part of the premises, no matter how small. The even more worrying inference from the decision is that, wherever a company in administration trades from let premises the administrators will be liable to meet, as an expense of the administration, all liabilities arising under the lease during that period, unless they have managed to negotiate a concession with the landlord. In a blow to administrators that will surely impact on the timings of any administration, most particularly those involving a large property portfolio, H.H. Judge Purle, sitting in the High Court, has handed down a decision that will have ramifications potentially as serious as those of Trident Fashions, Re, for administrators in considering how long to remain in office, or indeed whether to accept an appointment at all.”

    *This article was published in April 2010 and is reproduced with permission of Insolvency Intelligence