Carnage on the high street

The protracted economic recession has resulted in many business failures, with the retail sector being particularly hard hit. Familiar high street names such as Jessops, Blockbuster, Comet and HMV have all recently gone into administration, leaving their landlords in an uncertain position. To mitigate the effects of a tenant going (or potentially going) into administration, commercial landlords and their advisors should consider the following:

1. Keep on top of any rent and/or service charge arrears. You should consider seriously whether recovery action should be taken, particularly as, once the tenant has gone into administration, the statutory moratorium will restrict the steps that you can take.
2. Conversely, you may want to engage with your tenant as commercially it may be in your interests to offer a rent concession (either reduction or monthly rather than quarterly payments) to prevent the company becoming insolvent.
3. If an administrator is appointed and occupies the premises for the purposes of the administration, he is liable to pay rent. If he fails to do so, you should consider seeking permission from the court to take action. If an administrator is appointed after the quarter day and the rent is payable quarterly in advance then he will not be liable for the rent for that quarter. If the administrator is in occupation on a quarter day then he is liable for the full quarter even if he vacates earlier. The date of appointment can therefore be of major significance.
4. Watch out for the administrator allowing other parties into occupation. The administrator may have concluded a pre-pack deal whereby he has agreed a sale of the business prior to his appointment. He may then let the purchaser into occupation as a licensee pending a close down of those premises or an assignment of the lease to the purchaser. This is likely to constitute a breach of the lease and again you should consider seeking permission from the court to take action.
5. If the premises is vacated, satisfy yourself that appropriate insurance is in place and that the policy terms are being complied with.

IBB has one of the largest real estate groups in West London and the South East, with expertise in commercial real estate , residential development, real estate finance, real estate and investment management, construction and real estate dispute resolution. Contact a member of the team by visiting the relevant service page, or call us on 08456 381381 or email enquiries@ibblaw.co.uk.