LawTalk Blog

A warning to tenants - the High Court confirms the powers of liquidators

commercial and business law

In the past we have recommended to our clients that tenants who rent a shop, office, farm or other land have their lease registered against the land to protect their rights.

That remains important, but if your landlord is a company, then you may not have as much protection as you think.

The High Court of Australia has recently affirmed a decision of the Victorian Court of Appeal which says that a liquidator of a company may disclaim a lease agreement between a company and another person, even if the company is the landlord. See Willmott Growers Group Inc v Willmott Forests Limited.

What does that mean?

If you rent premises from a company and they go under, then its liquidator could refuse to be bound by the lease and instead evict you with little warning and little recourse.

It means that tenants need to be more careful to consider the financial position of their landlords and not rely solely on the fact that the landlord owns the property.

The future results of this decision are not yet clear. In many cases it may be possible to prevent the lease from being terminated by a liquidator if you act quickly, but perhaps only if the impact of the lease being terminated is far worse on you than keeping the lease on foot would be for the creditors. Often it will be, but not always.

It's an issue to pay attention to and we may see some changes to the law as a result of the decision.

We may also see a few changes to tenancy practices, such as more tenants asking for guarantees from the directors of landlords (it is normally the other way around).

Please note, this Blog is posted in Adelaide, South Australia by Andersons Solicitors. It relates to Australian Federal legislation. Andersons Solicitors is a medium sized law firm servicing metropolitan Adelaide and regional South Australia across all areas of law for individuals and businesses.

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