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Commercial lettings: Retailer Game loses landmark court case

The high street computer-game retailer Game has lost a Court of Appeal case and must now pay its commercial landlords up to £3m, reports The Telegraph.

Game Retail Limited called in the administrators in March 2012 and, as a result, defaulted on many of the commercial leasehold contracts acquired for Game stores.

A consortium of commercial landlords, including Land Securities, Hammerson, British Land and Intu Properties successfully argued that the unpaid rents dating from when the company was in administration should be treated as administration costs.

Game closed 277 stores in March 2012, but after a short period in administration the company was bought by investor Henry Jackson's OpCapita investment vehicle and has since bounced back, opening new stores and posting a £15m profit for the 2011/12 financial year.

The decision in this case closes a legal loophole that allowed companies to avoid paying quarterly rent if they went into administration around the time the quarterly rent was due.

The consortium of property owners claimed they lost out in millions of pounds of rent. Around £10m in rent was due on 425 leases on 25 March 2012, but the company went into administration on 26 March 2012, effectively avoiding paying that quarter's rent.

The stores were then purchased a week later on 1 April 2012 by Game Retail Limited, with many reopening shortly afterwards.

Game believes the decision has fundamentally changed the law on payment of rent in insolvency.

"The real ramification of this decision is that it will have a significant financial impact on all landlords, tenants and insolvency practitioners involved in current and future business insolvencies in this country," said Game in a statement.

It is understood the company intends to appeal to the UK Supreme Court.