Rent battles? I'm game if you are.

I note that the Landlords (Land Securities, Hammerson, Capital Shopping Centres and British Land) of Game Group have filed for court proceedings in relation to unpaid rent. They have instructed law firm, Berwin Leighton Paisner, to represent them. The case is important as it could (not necessarily will) reform the law concerning the recovery of rent once a company has been put into administration by its Landlords.

This is a contentious topic. As a reminder the basic position was established in Goldacre v Nortel (Goldacre). In short, administrators are liable for rent due after a quarter day if they continue to trade from the premises for the benefit of the creditors. However, the administrators are not liable for rent falling due before the company is put into administration. Consequently, many companies are being put into administration, immediately after the quarter day, in order to trade from the premises rent free for three months. The Landlord is left out of pocket for three months.

The rent bill in this case was £80m. PWC closed 277 Game stores. The group was later sold to the private equity firm - OpCapita. No small sum then.

In my opinion, the case demonstrates the advantages of monthly rents. If Landlords and Tenants agree to a monthly rent, at the outset of their negotiations, then any 'Goldacre' problems will be avoided because the Landlord will only have to wait a month (instead of three) for their rents. Monthly rents are attractive to struggling retail Tenants and will reduce the situation of the Tenant breaking the Lease (see previous posts on this) in order to look for a more attractive property. A lot of the big institutional Landlords have moved to monthly rents.

We shall have to wait and see whether or not the court swings in the Landlord's favour. The case could establish a 'pay as you trade' principle in which Landlords would pay a daily charge for use of the premises. Watch this space. Until then, the Game case illustrates the attractiveness of monthly rents. Monthly rents are beneficial to both the Landlord and Tenant and are something for the parties' Lawyers to bear in mind during Lease negotiations.

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