Can a retailer be liable for rent on a lease they sold in 1993 – the current tenant is in administration?
Unfortunately you may be. Under a pre-1996 lease, original parties remain liable for the term. The rationale is that those who signed up to the liabilities should be liable for the duration. This is not the same for a post-1996 lease so the differentiation is important. However, there may be ways to avoid or reduce the liability, says Kirsty Black, property litigator at law firm Browne Jacobson LLP.
“If the current tenant is a subsequent assignee then you may be able to pass on the liability under the indemnity that they are likely to have given at the time,” she says. He also advises retailers to check whether there have been any variations to the lease. If so, and they have increased the obligations on the tenant, then you may not be liable for the increase.
If you are liable, once you have made payment you will be entitled to request an “overriding lease” from the landlord which will, in effect, enable you to then deal with the property. However, this decision should be carefully considered.
“Former tenants being pursued by landlords have become increasingly common as more retailers become insolvent,” says Black. “There may be ways to avoid the liability, or pass it on, and obtaining early advice is imperative. Taking on an overriding lease may also result in responsibility for rates and utilities so knowledge of the market will be crucial in making that decision. Given mounting interest and costs, the importance of acting quickly cannot be overestimated.”