A recent High Court ruling relating to administrators having to pay rent when using premises for the benefit of creditors will have far reaching consequences according to a property expert.
Following the ruling the administrator now has to pay rent for the whole of the building, even when only part of it is being used and this means the landlord cannot rent out the unused part of the building. As the administrator pays rent as a part of a contract then they may also have a responsibility for the other terms of that contract.
Andy Higgs, from King Sturge in Birmingham, said: “Other liabilities could include things such as dilapidations and whilst it was not an issue in this case it does cause uncertainty.
“It is far from clear at the moment whether the administrator will be liable for more than just payment of the rent but the implications may be that administrators could be faced with a bill that runs into hundreds of thousands whilst landlords could find themselves due the same.
“There could be another negative consequence to this in that a company that finds itself in administration may become unviable because alternative procedures such as compulsory voluntary liquidations will be favoured.
“We have seen little comment on this issue and believe that administrators are not yet fully aware of their new obligations and potential increase in liability.
“It is likely that the dilapidations issue will be reviewed but until then we would urge caution.”