Extra powers for liquidators – how will this affect your lease?

Dean Claughton

A recent decision in the High Court of Australia gave liquidators of landlords extra powers to disclaim leases that are registered on title. For example, if a landlord leases a site to a tenant, and the landlord subsequently goes into liquidation, the liquidator does not have to abide by the terms of the lease, and may refuse to recognise the lease and ask the tenant to vacate the site.

Facts


Decision


The High Court decided that the liquidators did have the power to disclaim leases under section 568 of the Corporations Act.


Consequences for tenants

The implications of this decision are extremely serious for tenants, and it was not a decision the High Court took lightly. Essentially, this decision will allow all liquidators of a landlord the right to disclaim any leases that the landlord has entered into. This decision is especially dangerous for tenants who have just spent a substantial amount on fitting out a premise. It may mean that the tenant loses the benefits of the fitout because their lease is terminated, rendering the value of their fitout worthless.

This decision has been quite controversial, but because the decision was made by the High Court, it cannot be challenged any further. If the law wants to change in the future, then amendments to the Corporations Act will need to be made to overturn this decision.

For more advice on liquidation and your lease please contact:

Andrew Grima, Principal
Phone: + 61 2 9895 9271
Email: agrima@colemangreig.com.au

Dean Claughton, Lawyer
Phone: + 61 2 9895 9276
Email: dclaughton@colemangreig.com.au