Leases at risk when landlords go into liquidation

The High Court of Australia recently handed down a decision that confirms that when a landlord goes into liquidation, the liquidator may be able to disclaim a Lease granted by the landlord. 

Disclaim meaning that the Lease no longer exists and the Tenant will lose all of the rights under the Lease.

This is an important decision for agents and their Tenants and property managers to be aware of.

It is important to remember though that in these circumstances a Tenant may apply to the Court to have the disclaimer stopped. Where such an application is made the Court, in making its decision, will balance the rights of the Tenant against those of the Landlord’s unsecured creditors. One of the primary factors that will be considered is whether the loss to the Tenant outweighs the benefit to creditors of a higher return from the real property being sold with vacant possession.

In the instance of a Landlord going into liquidation it is important for a Tenant to as soon as possible obtain legal advice as to their rights, as there are timeframes that apply for when an application may be made.

With our extensive experience in property and insolvency law, Baker Love Lawyers is well placed to assist clients to understand their rights in this instance and take appropriate action. If you require advice or assistance in this area please contact our commercial law partner, and member of the Insolvency Practitioners Association, Dean Frith.