Trading in the Winter Period - A Cautionary Note for Landlords

Weak economic growth and increasing competition is still wreaking havoc in the High Street and the quarter that starts in January is often make or break for retailers as it is traditionally the worst trading quarter of their year.

Many commercial properties have quarterly rent falling due in March and, as a result businesses may be tipped into administration, especially if they are already in the 'halfway house' of a Company Voluntary Arrangement with creditors.

If a tenant goes into administration or announces their intention to go into administration, the landlord is in a difficult position, because an automatic moratorium on proceedings comes into effect, which lasts for a year.

In addition, the commencement or continuation of recovery proceedings in respect of unpaid rent will require the permission of the court, and a landlord will rank equally with other creditors. The rent from the date the administration starts will be part of the administration expenses and will rank ahead of the creditors generally. This will apply if the administrator continues to occupy the premises.

If the landlord wishes to repossess the premises, it is important that nothing is done (such as accepting rent) that indicates the lease is continuing.