Tenants in administration
the landlord’s options
Phones 4U entered administration on
the 15th September 2014 and ceased
trading two days later immediately
calling in to question the future of 560
stores and its 160 concessions. The
company had some 5,595 staff and
seemed to be represented on almost
every High Street.
Fortunately the administrators have been
able to report that some 140 stores were
sold to Vodafone, with 887 staff retained.
EE have taken on 58 stores and 360
staff. Dixons Carphone Warehouse has
also rescued the 140 concessions within
their stores, saving 800 jobs.
There are still 362 stores that have closed
and more than 4,000 ex-employees
whose jobs were not saved.
While the employees will receive some
assistance from the administrator in
relation to their claims, landlords will have
to work out how they deal with their now
insolvent tenant.
Here are some of the questions that we
are frequently asked by landlords where
an administrator has been appointed.
Will I get paid by the administrator?
Any arrears of rent will be treated as an
unsecured claim in the insolvency and
will be paid only if there is a return to
the secured creditors as a whole. In the
event that the administrator decides to
trade or continue to trade the business
from the premises, then if the premises
are ‘retained for the benefit of the
administration’ there is the argument that
rent during this time should be paid as an
expense of the administration.
Can I forfeit the lease?
The administration creates a moratorium,
preventing certain actions being taken
without the consent of the court or the
administrator. These include starting or
continuing forfeiture proceedings and
peaceable re-entry. Therefore, unless
a surrender can be agreed with the
administrator, the options may be limited.
Can the administrator assign the lease?
If the administrator finds a purchaser for
the business or part of it, they will want to
assign the lease. It is usual for a lease to
require the consent of the landlord, such
consent not to be unreasonably withheld.
Whether the consent can be reasonably
withheld will be a matter of fact for
each case and advice will be required.
Any decision will need to be made in a
reasonable time.
Is the guarantor liable?
This is often a very good starting
point. The drafting of the guarantee is
important and most will be drafted to
give the guarantor the primary obligation
to pay the outstanding sums. Some will
require a formal demand to be made
before the guarantor becomes liable.
Advice should be sought but landlords
also need to keep in mind that if the
guarantor is a director of the insolvent
tenant, they may also have been through
a difficult fina