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'Pay as you trade' legal case offers 'clarity' for landlords

A major legal win for some the UK’s largest landlords could have wide-reaching ramifications for retailers in administration or insolvency.

Landlords Land Securities, Hammerson, Intu and British Land yesterday won a two-year legal battle against Game, resulting in a £3m bill for the computer games retailer.

As a result of the test case ruling, retailers must pay rent on a ‘pay as you trade’ basis, regardless of when the retailer filed for administration. Previously rent would have been paid at the subsequent quarter it was due – and therefore it could accrue over three months – and was also treated as an unsecured claim, meaning it was unlikely landlords would ever receive payment.

Duncan Grubb, head of credit at Hammerson, said the judgement provided “a workable, common sense resolution to the payment of rent as an administration expense”.

However Game is considering appealing the decision, saying it would have a “significant financial impact” on landlords, tenants and insolvency practitioners.

Christopher Perrin, a property litigation specialist at law firm Irwin Mitchell, said the ruling provided “vital clarity to this area, closing the loophole and ensuring landlords are on a surer footing when it comes to administrations”.

He added: “This is a logical and sensible outcome and reverts the position to the old regulations pre-Goldacre, providing an element of certainty for all parties involved. However, it will be interesting to see what the next step in this long-running legal saga is.”

Dundas & Wilson partner Darina Kerr added: “For Game, the decision will be a blow. Game is often praised as a retailer which has managed to turn itself around following the launch of the PS4 and Xbox One. But its future is now looking dimmer as it faces a large bill to pay back the landlords.

“This is unlikely to be the last we will hear of this case as an appeal to the Supreme Court by Game could follow.”

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