The problem lies in IA 1986 which imposes a moratorium on actions which can be taken against a company in administration. In particular, no step can be taken to enforce a charge over the company’s property. At first sight, this would seem to prevent L from taking money from the rent deposit without the administrator’s consent or the court’s permission. 


However, it seems that is not the case, as a result of a seemingly irrelevant piece of legislation called the Financial Collateral Arrangements (No 2) Regs 2003 which disapply the moratorium in relation to any ‘financial collateral arrangement’. Previously it had been thought that the Regs should only apply where one or other of the parties was a specified type of financial institution or public authority (since the Regs were introduced to implement an EU Directive limited to such bodies). However, it has recently been held (in a case concerning a charge over shares) that the regulations in fact apply to everyone (except individuals). That being so, it seems that the Regs therefore apply to rent deposits, provided neither L nor T is an individual. Subject to that caveat it now seems clear that a rent deposit in the charging form will be construed as a financial collateral arrangement. One other point to note is that the rent deposit would have to be in the ‘possession or control’ of L and that would normally be the case if L has sole drawing powers, and especially if the account is in L’s name. The end result, therefore, is that most corporate L’s will be able to draw down rent deposits in the charging form when Ts go into administration. See R (Cukurova Finance) v HM Treasury [2008] EWHC 2567 (Admin) source: www.practicallaw.com (subscription service); (access free at www.practicalconveyancing.co.uk). Source: Lovells. © Practical Lawyer