A recent decision of the Victorian Court of Appeal held that the disclaimer of a lease by the liquidator of a lessor extinguished the leasehold interest of the lessee.
The decision will be of interest to both lessors and lessees. It had not been free from doubt as to whether the disclaimer of the lease by a liquidator for a lessor pursuant to the Corporations Act extinguished the leasehold interest of the lessee or merely extinguished the obligation of the lessor to comply with the lease.
This can be particularly relevant for example where the liquidator is wanting to sell a property unencumbered, that is not subject to a lease.
A lessee may have a right under the Corporations Act to challenge the disclaimer and may be successful but if not then the lessee's right to tenure at the site is extinguished by the disclaimer.
The decision has a significant impact on the tenure security of a tenant.
The practical consequences of this decision may include tenants needing or deciding to undertake more due diligence in respect of their landlords prior to entering in to leases.
If you as a lessor or lessee receive a disclaimer of lease from a liquidator then we suggest that you are best served obtaining advice in relation to it as soon as possible to ascertain the consequences and rights of potential challenge.
