Landlords - if your tenant goes into an insolvency process do not rush straight to the rent deposit

The tenant went into administration and the landlord paid the rent for the period of occupation by the administrators from the rent deposit.

The administrators then vacated the premises and consented to forfeiture of the lease and the premises was let to a new tenant.

The landlord contended that, as further amounts fell due under the lease for the period of occupation by the administrators and as, if the rent had not been paid from the recent deposit it would have to have been paid by the administrators as an administration expense, the tenant’s obligation to “top up” the rent deposit during the period of occupation should constitute an administration expense.

Whilst the landlord was able to demonstrate that the obligation to top up was a provable debt, the ICCJ disagreed that it was an administration expense.

Landlords should therefore think long and hard about drawing down on a rent deposit when a tenant goes into an insolvency process before seeing whether the rent will actually be paid as an expense.

Shinners and Myers v London Trocadero (2015) LLP [2019] EWHC 2932 (Ch)