×

Commercial Tenants and Insolvency

edward-howell-Jbf9nNe_qaE-unsplash

As you may recall, last year the Queensland Government released regulations in response to the COVID-19 pandemic providing landlords and tenants that have been affected by COVID-19 with a guide for their negotiations. Amongst the guidelines were provisions for commercial tenants to negotiate rent relief if they suffered a reduction in turnover due to the COVID-19 emergency for a fixed period (which has now expired).

With many industries continuing to feel the impact of COVID-19, and concern that insolvency rates will be on the rise as a result, it is important that landlords prepare for these conversations and consider how to maintain their own commercial standing following a tenant’s insolvency event.


Insolvency on the rise

Now that state relief measures have ended and there is no longer an obligation on landlords to waive or defer rent payments, landlords may experience an increase in commercial and retail tenants defaulting under their lease obligations due to financial hardship. Most often, the terms of your commercial or retail lease will stipulate that if a tenant enters into liquidation, administration or receivership, then they are in default under the lease.

The law sets out specific actions that a landlord must take once a tenant is in default before it can act against the tenant by, for example, terminating the lease or re-entering the premises.

In the quarter ending March 2021, ASIC reported a large number of external administration appointments. Industries highly affected include accommodation & food services, business & personal services and retail. As the ATO resumes pursuing and enforcing debt recovery actions and the temporary relief in insolvency laws have ended, this number is expected to increase while COVID-19 continues to wreak havoc on small businesses across the state.

What you can do

If you are a landlord with a retail or commercial tenant, it is important to understand your rights should your tenant default in rent payments or become insolvent. A failure to properly exercise your rights at law and under your lease or appropriately document any amendments to your lease could have detrimental effects in the future.

If you are a tenant experiencing financial hardship, Redchip’s insolvency team are available to assist you with working through your financial position and options available to you. A failure to act early may have serious consequences for not only the tenant company but also any directors of the company, including those who have signed personal guarantees under the lease.

Find out more

If you would like to discuss your options, please contact our experienced Property Team on 07 3223 6100 or email redchip@redchip.com.au for an obligation-free discussion.

Back to Articles
Redchip

Recent Articles

sean-pollock-PhYq704ffdA-unsplash (1)
Significant Changes to REIQ Commercial Contracts Land and Community Titles Scheme Contracts

The Queensland Law Society and Real Estate Institute of Queensland have introduced some of the most significant changes to the standard commercial land and community titles scheme (CTS) contracts we have seen in some time.

Read more
Lauren Cutuli
Announcing new Associate Directors at Redchip

We are proud to announce the appointment of three new Associate Directors at Redchip – Lauren Cutuli, Thomas Bevitt and Andrew Clements.

Read more
towfiqu-barbhuiya-JhevWHCbVyw-unsplash
The benefits of Put and Call Options to purchase property at the end of the financial year

Capital Gains Tax – What is it and when do I have to pay it? Capital gains tax is calculated and payable on profits made on the sale of certain property. A CGT event is the event that triggers the capital gain or loss and occurs at the date of signing a contract for the […]

Read more