Administering Remedies: Top tips for landlords in dealing with a retail administration
JJB Sports, once Britain's biggest sports retailer, finally went into administration this week, affecting the landlords of 133 shops. For landlords facing the administration of a large national retailer, there can be many considerations. These include:
- Ascertaining the administrator's proposals for an individual unit
By and large, profitable units may well be sold on, while underperforming units will be given up. It is important for landlords to know what an administrator's proposals are, and pressure can be applied to administrators to cooperate in this regard.
- The administration moratorium
Landlords are significantly limited in the action that they can take against a tenant in administration by virtue of the administration moratorium. However, in certain circumstances, it may be possible to apply successfully for the right to take action – for example, to forfeit a lease or to prevent a breach of covenant (such as an unauthorised occupier).
- Recovery of rent arrears
Where, as here, care is taken to appoint an administrator after the quarter day rent has fallen due, the administrator is not obliged to pay rent until the next rent payment date (provided that the premises remain occupied then). In the meantime, however, it may be possible for a landlord to look to third parties such as previous tenants, sub-tenants or guarantors. It may also be possible to enforce security such as rent deposits.
- Vacant possession
Where there is little or no prospect of a particular shop or a lease being sold on, an administrator will often try to surrender a lease. It is important that any relevant communications are dealt with properly in order to avoid a landlord inadvertently terminating a lease and becoming liable for empty rates.
Utility providers are increasingly attempting to recover charges for utilities against landlords where insolvent tenants vacate premises often (incorrectly) relying on statutory powers. It is important to resist this.
- Damaged premises
There may be some circumstances – for example, where damage is caused to premises or squatters are allowed to move in – where the administrator may be liable and the cost of rectifying a situation can be recovered.
On some occasions, an administrator may approach a landlord to try to broker a deal to enable a purchaser of the business to remain in occupation. It is important that landlords are fully appraised of their legal rights and obligations in order to negotiate.
Our dedicated real estate litigation team has significant experience in dealing with tenant insolvency. If you think that we may be able to assist you with any of the above issues or any other questions you may have, please do not hesitate to contact us.