Quarterly rent day expenses have resulted in a spate of retail administrations as businesses continue to adapt to significant shifts in trading conditions. But the problem has highlighted more than just the uncertain future of the British high street; it has also thrown up some issues within the administration system itself.
At the moment the system qualifies rent as an administration expense if it falls as due during the administration period. This forces administrators to pay the bills in full before they are able to deal with creditors' claims. With this in mind, businesses and administrators are sometimes opting to delay the appointment of administrators until after the quarterly rent day has passed.
None of this would necessarily be a problem if it wasn't for the fact that it increases the likelihood of a liquidation or a pre-pack administration, rather than leaving the door open for a potentially more profitable trading administration.
Giles Frampton, vice-president of insolvency trade body R3, explained the issues: “The rules on administration have developed haphazardly over time, and seem to have lost sight of a reasonable ‘pay for what you use’ principle. This has pushed the administration expenses bill higher and higher.
“The potential size of administration expenses has pushed Insolvency Practitioners towards liquidations or pre-pack administrations where a trading administration might otherwise have been appropriate.”
He added that the current rules are putting jobs at risk and reducing the returns making their way back to creditors – including landlords. They are also cutting down distressed buyers' opportunities to generate economic growth by acquiring and turning around troubled firms. 
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