TJ Hughes’ landlords sue for rent payments
Landlords have launched legal action against the administrators of collapsed discount department store retailer TJ Hughes, as they seek to change the law surrounding the payment of rent during administrations, according to PropertyWeek.com.
The landlords hope to extend a controversial precedent set in 2009 by Goldacre v Nortel Networks UK, which would enable them to recoup their losses when administrators are appointed after a quarter rent date.
The landlords, among them clients of F&C Reit Asset Management and Frogmore, have applied to Leeds High Court seeking “hundreds of thousands of pounds” of unpaid rent, and to establish whether rent owed before administrators are appointed should be paid if stores continue to trade while the retailer is in administration.
The legal action comes ahead of the September quarter day, which is expected to trigger a fresh wave of retail insolvencies and as the 99-year-old TJ Hughes ceases to trade from many of its 57 stores.
The Goldacre case found that if a company in administration uses leasehold property for the benefit of its creditors, any rent due in the period of use ranks as an expense of the administration and should be paid.
TJ Hughes went into administration on 30 June, six days after rent was due for the next quarter. Administrators at Ernst & Young have not paid rent, despite trading at many of the stores.
A spokesman for Ernst & Young said: “TJ Hughes in administration has and will continue to make payments for rent when it falls due under the terms of the lease for properties to which the company is still in occupation and receiving the benefit.”
F&C Reit is pursuing a case based on four properties let to TJ Hughes: stores in Liverpool, Sunderland and Corby, and a distribution centre. Frogmore is pursuing a case for more than £50,000 of rent on a TJ Hughes store in its Port Arcades Shopping Centre in Ellesmere Port, Merseyside, which closed on 23 August.
Siobhan Jones, partner at law firm Manches, commented: “After Goldacre, it was accepted that administrators could avoid rent liabilities by their timing — for example, by putting the company into administration just a few days after the rent date.
“If these cases are successful, I could see it encouraging more prepack administrations. If administrators know they can’t get around rent liabilities by timing, another way to do that is to use prepacks and ensuring that the purchaser becomes liable for the rent.”
