Expert: How can Chapelfield’s shops still trade when its owner is in administration?

Intu-owned Chapelfield, pictured before lockdown. Pic: Archant

Intu-owned Chapelfield, pictured before lockdown. Pic: Archant - Credit: Archant

Intu, the owner of Norwich’s Chapelfield shopping centre, is in administration but the receivers have stated shops can still trade as usual. Elizabeth Gibson, an associate at Rogers & Norton, answers why.

Solicitor Elizabeth Gibson of Rogers & Norton is a key member of the litigation team, specialising i

Solicitor Elizabeth Gibson of Rogers & Norton is a key member of the litigation team, specialising in general civil litigation, including debt recovery, contract disputes, landlord and tenant disputes, insolvency and enforcement of judgments. Pic: Rogers & Norton

What is administration?

It is the process by which an administrator is appointed to ‘rescue’ a company as a going concern. Unlike with liquidation the company continues to exist. The administrator has power to do anything necessary to manage the affairs, business and property of the company, as set out in (paragraph 59(1), Schedule B1, Insolvency Act 1986. In addition they have certain specific powers, as set out in Schedule 1 of the Insolvency Act 1986 which include:

(a) power to take possession of, collect and get in the property of the company and, for that purpose, to take such proceedings as seem to them to be expedient;

(b) power to sell or otherwise dispose of the property of the company by public auction or private contract;

(c) power to grant or accept a surrender of any lease or tenancy of any of the property of the company, and to take a lease or tenancy of any property required or convenient for the business of the company.

In exercising its powers, the administrator is deemed to act as the company’s agent. In the context of Intu, this means that the administrator is able to “step into the shoes” of the company and could deal with, in this case, the shopping centres as they see fit.

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What happens to the shops?

During an administration the properties of a company can be managed as a going concern. If this happens the shops do not necessarily have to close and their leases would usually continue. This means that they still have to continue to pay their rent as usual, although payment would be made to the administrator rather than to Intu. There may well be no apparent difference from the perspective of the customers. If any of the tenants themselves fall into financial difficulty and do not pay their rent the administrator has the power to take possession proceedings or issue proceedings to recover any unpaid debts.

As noted above, the objective of administration is to try to rescue the company as a going concern, either until a buyer can be found or the company is in a healthier financial state and able to stand on its own once again. If this is unsuccessful the company can still go into liquidation. If the landlord company is the freehold owner of the shopping centre the liquidators may choose to sell the property in order to pay off creditors.

Ms Gibson added: “Sadly, the impact of the lockdown is likely to result in landlords and tenants alike facing financial difficulties and in this sense Intu will not be alone. It is of course hoped that processes such as administration will assist these companies in their recovery so that life can return to some form of normality.”

Please note that this article is provided for general information only. For specific advice, always consult a solicitor.