25 February 2014
GAME Loses Property Legal Fight
GAME, one of the UK's largest electronics retailers, has lost a property battle in the Court of Appeal.
The chain, which is now owned by OpCapita and the Elliott Advisors hedge fund, argued that a legal loophole allowed it to avoid paying rent on some of its units for three months.
Lawyers from the firm argued in Court that if administrators were appointed shortly after the quarterly rent day, they would be exempt from having to pay the fees as it was written off as part of its potential insolvency.
This was disputed by a number of property companies, including Land Securities, Hammerson and British Land, all of which claimed to have missed out on millions of pounds in rent because of the loophole.
After the lengthy trial, the Court of Appeal ruled that GAME's strategy was not legal and it has been ordered to pay £3 million in compensation to the companies it failed to pay in the period after it entered administration.
In a statement released after the verdict was handed down, GAME said the ruling would change the way that retail companies approach administration in the future, indicating it may have a negative effect on the UK's economy.
"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," the spokesperson said.
Any potential downsides to the ruling were downplayed by property group Hammerson, which argued the judgement will be beneficial to both landlords and tenants of retail units.
"Corporate restructuring will now be focused purely on trading patterns and the viability of the ongoing business, rather than on rent free periods from landlords provided by a legal loophole," said Duncan Grubb, head of credit control at Hammerson.
It's unclear if GAME plans to take the case to a higher Court, although its statement may be a sign it has accepted the verdict.