A court in the UK has ruled that the GAME group of video game retailers did incur rental charges when underwent Administration in 2012.
The then failing company incurred the charges during a period where it was being rescued from debt in order to continue its business. Its landlords (a consortium of which brought the case), however, now want their cash: £3million of it. Retail Week
reports that a spokesman for GAME stating that, “The real ramification of this decision is, however, that it will have a significant financial impact on all landlords, tenants and insolvency practitioners involved in current and future business insolvencies in this country.
However, the other side of the story was put by Law firm BLP, acting for the landlords which stated that, “This decision is a landmark one and should bring welcome clarity to what has become a contentious area of law in recent years.
“The landlord community will welcome the decision, knowing that they will receive payment for the use of their property by companies in administration.”
The case - which is a test case for insolvency law - saw the "Landlords claim that the “new Game” was able to operate rent-free for three months because of the legal loophole. Under the existing law, rent that is due during an administration is payable as an expense if the business continues to use the property. However, if a company files for administration just before quarterly rent day and administrators are appointed within 10 days, the rent can legally go unpaid."
GAME is expected to appeal the ruling to the Supreme Court.