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VAs from a Lessor’s perspective

Voluntary Administrations pose specific problems for lessors. Detailed below, are a number of questions regularly asked by lessors who are faced with a tenant entering voluntary administration.

Can I enter into position when an administrator has been appointed, in the event of unpaid rent or a default under the lease?
No. Not without leave of the court or with the administrator’s consent.

If I cannot enter into possession, can I commence legal action for recovery?
No. Not without leave of the court or with the administrator’s consent.

What if I commenced action prior to the administration?
If the owner entered into position, assumed control or exercised any other power in relation to the property for the purpose of enforcing a right of the owner or lessor before the administration, then the owner or lessor can continue to exercise that power during the administration.

What is the period of the administration?
The period of the administration commences with the appointment of an administrator. The usual period is around one month. The administration usually ends with either a resolution that the company be wound up, that the company execute a Deed of Company Arrangement or that the administration should end and the company be returned to the control of the directors.

What about rent accruing after the date of appointment of the administrator?
The administrator is personally liable for the rent or other amounts payable under the lease agreement that is attributable to the period that begins eight days after the commencement of the administration and throughout which the company continues to use or occupy the property.

What action can I take at the end of the administration?
If the company has gone into liquidation or merely been returned to the directors then the lessor is free to take possession of the property. If the company is in liquidation then the lessor must simply submit their claim to the liquidator. If the company enters into a Deed of Company Arrangement the deed will not affect the rights of the lessor unless the lessor voted in favour of the deed. If a proposed deed has provisions, which affect the rights of the lessor, careful consideration should be given as to whether to vote on the deed. If a lessor intends to vote against the deed they should instruct the administrator to record the vote against the motion if the vote is determined by the voices.

Who is liable for the costs of restoration of a vacated properly?
There is no liability under the Corporations Act on an administrator or receiver for the costs of restoration of a vacated properly. The company will be liable under the terms of the lease, but that will simply form part of the unsecured claim in a liquidation. However, if damage is caused to the premises during the period of administration, the administrator will be personally liable for the damage and may have to “make good” the damage.

Should I attend the creditors meeting?
Often it is worthwhile to attend a creditors meeting to gain information about the plans that the administrator may have for your property.