The British Property Federation and law firm Lovells have issued a guidance document that landlords can use to compel full disclosure from administrators during the ‘murky process’ of a pre-packaged administration.

The two bodies have prepared an online template with a standard set of questions that landlords can send to the administrator of an insolvent tenant's business.

Questions cover matters such as: the identity of the buyer of the property; the buyer’s intentions for the property; and whether the insolvent tenant's lease has been assigned, without permission, to the buyer.

Administrators, under ‘Statement of Insolvency Practice (SIP) 16 guidance’ rules, have a compulsory duty to respond to these questions and give ‘full and clear disclosure to creditors’.

The BPF said if administrators fail to meet all their obligations under SIP 16 guidance they can face disciplinary action including being struck off by the regulator.

The launch of the document, which can be downloaded free from the BPF website, coincides with a report published on Monday by the Insolvency Service reviewing practitioners’ compliance with SIP 16 for the first six months of 2009. It found that of the 572 ‘SIP16’ reports reviewed only 65% were ‘fully compliant’ with disclosure requirements and 3% have been referred to the regulator.

Key failings in process
It said the ‘key failing was a lack of sufficient detail for creditors to be able to properly assess the merits of the sale’ including: statements being issued to creditors late; missing details of a valuation or marketing exercise; omitting details of a connection between the insolvent company and the purchaser of its business.

Graham Horne, deputy chief executive of the Insolvency Service, said: ‘There is still a fair way to go to ensure that creditors receive the information they need in a timely manner. We will be looking to strengthen SIP 16 to ensure it gives creditors what they want.’

The BPF said its online tool will help landlords gain ‘further clarity’. It said: ‘The answers to these questions will help the landlord understand the state of play with his property or properties and give him ammunition - in select cases - to challenge the administrator’s decision to pre-pack.

‘Though landlords welcome a rescue culture for struggling businesses, concerns have been expressed at the limited transparency of the pre-pack process.’

Pre-pack administrations have been a hallmark feature of the current downturn last week Allied Carpets sought a pre-pack administration solution.

Grim situation
Ronan Faherty, Land Securities’ commercial director, said: ‘Following a pre-pack administration a property company is often in the grim position of knowing little about the intentions of the new occupier of his properties. Uncertainty is generally bad for any business and in this instance can harm other retailers in an existing scheme.’

Ian Fletcher, director of commercial policy at the BPF said: ‘Having just heard the news that Allied Carpets has undergone a pre-pack administration it is clear that pre-pack administrations as a form of business rescue is very much alive. This questionnaire has been designed for landlords by landlords and will be a useful tool to enable them get a better idea of what is happening to their property following a pre-pack.’

Tim Reid, senior associate in real estate at Lovells, said: ‘Pre-packs are not intrinsically a bad thing. However, when a tenant unexpectedly enters administration and transfers its business and property to a new company, the landlord is entitled to demand from the administrators enough information to help him protect his interests, both legally and commercially.

‘The industry regulator The Insolvency Service has pledged to monitor closely the way that insolvency practitioners respond to SIP16. A copy of the BPF questionnaire should therefore grab every pre-pack administrator's attention, and provide landlords with the level of disclosure and transparency to which they are entitled.’

To download the form go to

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