Administration of a commercial landlord - what does this mean for a commercial tenant?

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Dispute Resolution Article

30 June, 2020

The Administration of Intu who own both the Trafford Centre in Manchester and the Lakeside Centre in Essex, has come as a shock to many, not least of which are the retail tenants of the shopping centres who are already facing challenging and uncertain futures in their own right as a result of the Covid-19 pandemic. What does Intu's situation mean for the struggling retailers in the shopping centres?

What is Administration?

Administration is where a business in financial difficulty will appoint an independent Administrator to try and "rescue" the company as a going concern, that is to ensure the company's continued operation either by seeking investment or a buyer. A recent example is House of Fraser who went into administration before Mike Ashley's Sports Direct purchased the company and enabled it to continue trading.

What happens if the commercial landlord goes into Administration?

It is important to note that the administration of the landlord does not give rise to a right of forfeiture of the lease, and should a tenant wish to end a tenancy because of the financial/trading situation of the landlord, they will need to agree a surrender of the lease.

As with House of Fraser and the many other High Street names that have struggled in recent years, the Administrators will try and secure a purchaser for the company. The question here is, is the landlord the head-landlord or an intermediate landlord? If the company is the head-landlord, then there will be minimal disruption to the tenant, assuming a purchaser can be found. If the company is an intermediate landlord, then the situation becomes more complicated and it may be worth the tenant entering into discussions with the head-landlord to agree terms of a new lease.

What's a tenant to do?

If your commercial landlord has gone into Administration or Liquidation, there will inevitably be a number of questions and concerns that the tenant has; should they continue paying rent? What about service charges and who will manage the maintenance of the building? What will happen to the business?

For more information contact Laura Hallett Lea in our Dispute Resolution department via email or phone on 0333 207 1141. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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