We have previously posted on the impact of the 2009 Goldacre case (Goldacre (Offices) Limited v Nortel Networks UK which ruled that landlords of tenants in administration are able to claim rent as an expense of the administration when the administrators use leasehold property for the benefit of the tenant’s creditors.

Is this really as good as it seems?

On the face of it, this was a good result for landlords. However, the precedent set by the Goldacre case has meant that only rent falling due for payment after the appointment of administrators can be claimed by landlords under this special category. This has resulted in an increasing trend towards administrations starting just after a rent payment day, forcing landlords to wait until the next rent payment day (usually a full quarter) before making such a claim. Naturally, this has left some landlords substantially out of pocket and so it was no surprise to hear of a group of landlords challenging the current position.

Legal action launched by landlords against the administrators of TJ Hughes, the discount department store retailer, sought to challenge the Goldacre case and establish whether rent that had fallen due for payment prior to the appointment of administrators should also be paid as an administration expense. TJ Hughes collapsed into administration on 30 June 2011, six days after the June quarter day. As a result of the Goldacre case, the administrators were not legally obliged to pay the June quarter’s rent, despite trading from a number of the premises.

Rather unhelpfully to the rest of us, this action was settled out of Court, leaving landlords still facing this uncertainty. However, the fact that a settlement has been reached at least indicates that the precedent set by the Goldacre case is open to challenge.

There is a clear need for further clarity on the Goldacre case. Given the current economic climate which is proving difficult for retailers, it seems likely that fresh administrations will lead to similar claims, particularly following the December quarter day. To that end, we anticipate a further post in the not too distant future.