In cases of administration, landlords are prevented from taking direct action against tenants without the consent of a court order. Since this act is regarded as a protective ring fence, it can be a more complex situation for landlords than when tenants go into liquidation.
If the landlord becomes concerned enough about the situation to apply to the court, the judge will weigh all the circumstances of the case to balance the interests of the landlord against the interests of the company creditors. Commonly, landlords would be seeking (a) forfeiture or (b) declaratory relief against the company.
Using the Tenant’s Premises
When using a company’s premises, including rented property, for the purposes of an administration, then the expenses of that must be paid as an expense of the insolvency. When premises are not used in this way, the landlord simply becomes an unsecured creditor and must wait in line to be paid.
There is an exemption upon having to pay business rates if premises are unoccupied.There are initial exemption periods of 3 months for office and retail premises, and 6 months for warehouse premises.
Section 3 of The Law of Distress Amendment Act 1908 gives landlords the right to recover rent directly from sub-tenants of the property during a company administration. This may or may not be challenged by the administrator as a breach of the moratorium, so it is best to take legal advice before attempting this.
In contrast to the liquidator’s right to disclaim a lease, administrators have no right to declare a company lease as ‘onerous’.
If you would like to talk to someone about administration and whether it’s suitable for your company, call us on 08000 746 757 or use the live chat function below.