Retail Administration immediately following Rent Quarter Date – Why?

If rent falls due during an administration it qualifies as an administration expense which must be paid in full before the creditors’ claims are dealt with.  This expense may be avoided if the Company files for Administration immediately after the quarter day, which means that the landlord becomes a creditor for the rent (usually payable quarterly in advance) and ranks equally with other unsecured creditors.   Because the Administration provides a moratorium for the insolvent company, whereby no legal process can be instigated or proceeded with, the landlord loses his powers of forfeiture or distraint, without obtaining either the consent of the Court or the Administrator.  Consent will only usually be given if the landlord’s proposed action does not impede the purpose of the administration and is not detrimental to the general body of creditors.

The Administrator will of course be required to pay rent for his period of occupation.  This may only be for a short period (less than three months) and the Administrator will, in avoiding the advance quarterly rent payment, have reduced the cost of the administration and maximised the return to creditors as a whole.

The high cost of trading a company in administration has however seen a lean towards liquidations or pre-pack administrations as the chosen insolvency process, when a trading administration might otherwise have been appropriate.