In periods of economic uncertainty, it is not only tenants that suffer financially but landlords as well. A recent case highlights the fact that the courts would be wrong to improve the position of a landlord or bank by prejudicing a tenant.
A new lease application made by Somerfield Stores Ltd. was opposed because the landlord wanted to redevelop the property. As the landlord then went into administration, the lease application, a ‘legal process’, could not continue without the permission of the administrator or the court.
The administrators refused permission on the grounds that they wanted to explore the viability of development to enhance the value of the property, although they could not assert that they had an actual intention to develop. When Somerfield wished to refurbish the store, it was left in a state of uncertainty.
Albeit that the landlord was no longer in a position to redevelop the property, any such development would benefit the interests of the bank, but not the unsecured creditors. The court ruled that the administrators should not improve the position of a secured creditor over the interests of a third party, as it was not in the interests of the creditors as a whole.
Somerfield, like any other applicant to the court, had a right to have its application heard without undue delay and, as things stood, had a right to a new tenancy. The court allowed the lease application to continue.
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Partner Note
Somerfield Stores Ltd. v Spring (Sutton Coldfield) Ltd. See http://www.bailii.org/ew/cases/EWHC/Ch/2009/2384.html.