Retailer GAME has lost its landmark legal battle against a consortium of landlords.
Retail Week reports that courts have ruled that Game Retail is liable to missed rent payments incurred during its period of administration 2012. It will now be forced to pay back £3m – a sum the chain says it has already accounted for.
The consequences for the entire retail sector are likely to be significant, as administration is frequently planned in such a way so as to avoid paying rent fees.
“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,” a GAME spokesperson stated, adding that an appeal in being considered.
The ruling increases the likelihood of further retail collapses but provides significant reassurances to landlords and creditors.
“The previous system was deeply unsatisfactory for both landlords and insolvency practitioners and this judgement provides a workable, common sense resolution to the payment of rent as an administration expense,” Hammerson’s head of credit control Duncan Grubb added.
“This judgement will significantly change the relationship between landlords and insolvency practitioners, and will hopefully lead to more collaboration when dealing with critical situations.
“Corporate restructuring will now be focused purely on trading patterns and the viability of the ongoing business, rather than on rent free periods from landlords provided by a legal loophole.”
UPDATE: Here's GAME's full statement:
“The Court of Appeal’s decision in this important test case for the property and retail markets fundamentally changes the law in relation to the payment of rent in an insolvency context. There were important principles at stake for commercial landlords, retail tenants and, indeed, any company with property assets.
"Game’s exposure following this decision is limited to a one-off liability of £3 million which has already been accounted for. 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.
"Game strongly argued against the law being changed on legal and commercial grounds and is now considering the possibility of an appeal to the Supreme Court.”