Game’s court case sees “pay as you stay” introduced
The Court of Appeal has made a big change to the way retail administrations are handled, deciding that landlords should be paid even when the company has collapsed just after receiving a rent bill.
The test case involved Game Group, which filed for administration the day after its quarterly rent was due in March 2012, meaning that, under the rules, PwC didn't have to pay the bill as an administration expense.
This gave Game three months rent-free while parts of the business were sold on to private equity group OpCapita – providing valuable breathing space while the newly-created Game Retail got on its feet, but a big loss to landlords including British Land, Hammerson, Intu and Land Securities.
The Court of Appeal said today that a “pay as you stay” rent bill would be fairer on both sides.
“This decision is a landmark one and should bring welcome clarity to what has become a contentious area of law in recent years,” said Michael Metliss, the lawyer at Berwin Leighton Paisner, who acted for Game’s landlords.
Katie Bradford, head of property finance litigation at PwC’s legal representative Linklaters, pointed out that the new system could lead to “a higher proportion of early store closures following an appointment [of administrators]” in order to avoid paying for shops the company is unlikely to keep open.
Game Retail said the decision will mean a £3m rent bill, which has already been accounted for in last year’s results. The retailer said it is considering an appeal to the Supreme Court.
More than 180 retailers fell into administration last year, according to figures from Deloitte.