What happens if a tenant goes into liquidation?

It is unlikely that a company will still exist after the end of a period of liquidation given that the purpose of the appointment of a liquidator is:

• to use the assets of a company to pay the company’s debts; and
• to then “wind up” the company.

Landlord may be entitled to terminate the lease

The appointment of a liquidator for a tenant company may entitle the landlord to terminate the lease if the relevant default clause in the lease that lists the “events of default” includes the appointment of a liquidator; however, despite anything to the contrary contained in the lease, the landlord would need to give notice to the tenant in accordance with the relevant legislation before terminating the lease. See Guidance Note: Landlord’s remedies against a tenant. For example, if in NSW, the landlord would need to comply with s 129 of the Conveyancing Act 1919 (NSW), ie, the landlord would need to give notice to the tenant, requiring the tenant to remedy the breach (ie termination of the liquidator’s appointment) within a “reasonable time”.

There are a few practical difficulties with this process, including:

• determining a “reasonable” time for the cessation of a liquidation (the standard period of 14 days is unlikely to be adequate); and
• the fact that a liquidator is usually appointed when a company is unlikely to be able to recover (and is often appointed by the court).