The High Court has held that if T is in administration, and the administrators use any part of the property, then the whole of the rent will be an administration expense (ie the rent will rank ahead of sums due to preferential and other unsecured creditors).

For instance, suppose rent is due in advance on the usual quarter days. The administrators are using part of the premises on 25 March 2010, but vacate on 1 April 2010. The administrators are liable for the full quarter’s rent (even though they only occupied for one week, and even though they only used part of the premises). In summary:

• full rent is payable even if only part of the property is used;
• rent falling due is payable in full for the rental period (eg for the rental quarter) even if the administrators vacate before the end of the rent period;
• if the administration begins during an existing quarter period, it is not clear whether the rent payable for the rest of the quarter also counts as an administration expense;
• L is not guaranteed his rent money. If the administrators do not have sufficient funds, then the rent will be paid pro-rata with the other administration expenses;
• any rent accruing before the date of the administration will not be an expense of the administration (ie L will rank alongside other creditors for those arrears);
• in many cases the administrators will allow a buyer of the business or assets to occupy premises under a licence to occupy. It is not clear whether this will count as occupation by the administrator (logically, it would seem to);
• there may well be disputes about what amounts to ‘occupation’. Simply leaving assets of the company on the premises is unlikely to be sufficient (see ?ABC [1970]), but keeping assets in the premises with a deliberate view that this will then enable them to achieve a better sale price, will almost certainly be regarded as sufficient use (?Re Linda Marie [1988]);
• presumably the definition of ‘rent’ will extend to other items stated by the lease to be treated as rent (eg insurance premiums and service charges).

In practical terms, this new rent obligation will make it impractical for some companies to carry on trading, and may therefore force more companies into liquidation. Be that as it may, the fact is that L is now in a stronger negotiating position than was previously the case. See ?Goldacre v Nortel [2009] EWHC 3389 (Ch). Source: Berwin Leighton Paisner; see also [2009] NLJ 131.