- When a company enters voluntary administration, the Corporations Act 2001 (Cth) immediately stops a landlord from terminating a lease or recovering possession — even for unpaid rent
- The moratorium under section 440C protects the insolvent company’s occupancy until the administration ends
- Landlords may be able to terminate within 5 business days of the VA starting if a default existed before the administration began — but must act immediately
- If the company goes into liquidation, the liquidator can disclaim the lease under section 568, extinguishing the company’s obligations — but also the landlord’s ability to recover ongoing rent
- Landlords should take immediate legal advice, register any security interests, and participate in creditors’ meetings to protect their position
When a commercial tenant goes into voluntary administration, most landlords are caught off guard. Rent stops. The administrator moves in. And despite having a valid lease, the landlord discovers that the normal rules — terminate for non-payment, re-enter, re-let — no longer apply.
This guide explains what the Corporations Act 2001 (Cth) does to your rights as a commercial landlord when your tenant enters voluntary administration, what options you have, and what you need to do right now.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
What Is Voluntary Administration and Why Does It Affect Your Lease?
Voluntary administration is a formal insolvency process under Part 5.3A of the Corporations Act 2001 (Cth). A director of a financially distressed company — or in some cases a secured creditor — appoints an independent insolvency practitioner as administrator. The administrator takes control of the company and its affairs for a short period (typically 20–30 business days) while creditors decide the company’s future.
The moment a voluntary administrator is appointed, the Corporations Act creates a moratorium — a legal freeze on most enforcement rights against the company. This moratorium is designed to give the administrator breathing room to assess the business and formulate a plan. It applies to creditors, secured parties, employees — and importantly, to landlords.
The Moratorium: Section 440C and Your Right to Recover Possession
Section 440C of the Corporations Act 2001 (Cth) is the central provision every commercial landlord must understand. It provides that during the administration of a company, a person who was the owner or lessor of property used or occupied by the company immediately before the administration began is not entitled to take possession of that property or otherwise recover it — except:
- With the administrator’s written consent, or
- With the leave of the court
This means that even if your tenant was in default of rent before the administrator was appointed, you cannot:
- Re-enter the premises
- Change the locks
- Terminate the lease
- Distrain for rent
The section 440C moratorium applies from the moment administration begins and continues until the administration ends — either when a Deed of Company Arrangement (DOCA) is executed, the company goes into liquidation, or control is returned to the directors.
Breaching this moratorium by attempting to recover possession without court leave or administrator consent is not just legally ineffective — it can expose the landlord to claims for interference with the administration process.
The 5-Business-Day Window: Your Critical Exception for Pre-Administration Defaults
The moratorium is not absolute. The Corporations Act recognises that where a tenant was already in material default before the administration began, it would be unfair to trap a landlord indefinitely. There is a limited exception allowing a landlord to act in the first 5 business days after the administration commences.
If your tenant was in default under the lease at the moment the administration began (for example, unpaid rent, breach of a lease covenant, or other existing default), you may — within 5 business days of the administration starting — serve notice and take steps to exercise your termination rights.
This window is extremely short. If you discover your tenant has entered voluntary administration, you must immediately contact an insolvency lawyer to assess whether you qualify for this exception and, if so, take the appropriate steps. Waiting even a few days can extinguish this right entirely.
If the 5-business-day window has passed, your only avenue to recover possession during the administration is to apply to court for leave under section 440C.
Rent During the Administration: Who Is Liable?
One of the most pressing questions for landlords is: will the rent keep being paid during the administration?
The administrator is personally liable for obligations incurred by the company during the administration — including rent and outgoings — where the company continues to occupy the premises. This personal liability is established under section 443A of the Corporations Act.
However, section 443B provides an important exception: the administrator is not personally liable for pre-existing obligations — including rent — for the first 5 business days of the administration. This gives the administrator a brief window to assess whether to continue occupying the premises or to vacate.
After those 5 business days, if the company remains in occupation, the rent becomes an expense of the administration and must be paid as a priority obligation. Failure to pay rent after this point gives the landlord stronger grounds to seek relief from the court.
If the administrator vacates the premises within the 5-business-day window, the company’s ongoing rent liability falls away for the period after vacation — though pre-administration arrears remain as an unsecured debt.
Applying to Court for Relief
If the administrator is refusing to pay rent, has vacated the premises without proper notice, or is using the property in a manner that damages your interests, you can apply to court for leave under section 440C to recover possession.
Courts will balance the landlord’s interests against the purpose of the moratorium — giving the administration a genuine opportunity to succeed. You are more likely to obtain leave where:
- The administrator has abandoned the premises or clearly does not intend to continue operating from that location
- Significant rent arrears have accumulated that are not being paid as an expense of the administration
- The administrator has no realistic prospect of saving the business or achieving a DOCA that addresses the landlord’s position
- Continuing occupation is causing irreversible damage to the property or prejudicing other tenants in a shared building
Applications for leave must be brought promptly. Delay weakens your position.
What Happens at the End of the Administration?
The administration ends in one of three ways, each with different implications for your lease.
1. Deed of Company Arrangement (DOCA)
If creditors vote to enter a Deed of Company Arrangement (DOCA), the company is returned to some form of trading under a structured compromise with creditors. Under section 444G of the Corporations Act, all creditors — including landlords — are bound by the DOCA if it is properly approved, regardless of whether they voted for it.
A DOCA may propose to continue the lease on modified terms (reduced rent, rent holiday), assign the lease to a new operator, or bring the lease to an end in return for a compromise payment. As a landlord, your ability to reject these proposals is limited once the DOCA is approved. Participating actively in creditors’ meetings — and seeking legal advice before any vote — is critical.
2. Liquidation
If creditors vote to wind up the company, a liquidator is appointed. At this point, the lease moratorium provisions of Part 5.3A no longer apply — but the liquidator has a powerful new tool: the right to disclaim onerous property under section 568 of the Corporations Act.
A liquidator can disclaim a lease if it is considered an onerous contract — a lease that imposes obligations on the company that are not matched by value. Disclaimer ends the company’s obligations under the lease from the date of disclaimer. It does not transfer the lease to the liquidator; it simply terminates the company’s side of the contract.
For the landlord, disclaimer is a double-edged outcome. You recover the property and can re-let it. However, you cannot recover ongoing rent from the company after the disclaimer date, and you rank as an unsecured creditor for any pre-disclaimer rent arrears — meaning recovery is likely to be minimal or nil.
Importantly, disclaimer can also affect any guarantor of the lease. If a director or related entity has guaranteed the lease, the guarantee typically survives disclaimer of the lease by the liquidator. This is a significant recovery avenue for landlords — and one that many miss.
3. Return to Directors
If the administrator recommends returning control to the directors and creditors agree (or the administration ends without a DOCA or liquidation), the lease continues on its original terms. The rent arrears accumulated before and during the administration remain as company obligations. This is the rarest outcome.
Key Steps for Commercial Landlords Right Now
If your commercial tenant has entered voluntary administration, these are the actions you should take immediately:
- Check the date of appointment. The 5-business-day window runs from the date the administrator was appointed, not when you found out. Confirm the appointment date immediately.
- Assess pre-administration defaults. Review your lease and records for any defaults that existed before administration. Even one day of pre-administration default could qualify you for the limited exception — but only if you act within 5 business days.
- Contact an insolvency lawyer today. This is not a situation for a standard property lawyer. You need an insolvency lawyer who understands section 440C, administrator liability for rent, and DOCA voting strategy.
- Check for personal guarantees. Identify all guarantors of the lease. In most commercial leases, a director personally guarantees the company tenant’s obligations. That guarantee survives the administration and any subsequent liquidation.
- Register as a creditor. Write to the administrator and register your claim for all rent arrears and other amounts owing under the lease. This ensures you receive the report to creditors and can participate in the creditors’ meeting.
- Attend the creditors’ meeting. The creditors’ meeting is where the fate of the company — and your lease — is decided. Come prepared with legal advice on whether the proposed DOCA adequately addresses your position, or whether liquidation better serves your interests.
- Consider your re-let options. Even under the moratorium, you can begin marketing the premises (discreetly) so you are ready to re-let quickly once possession is recovered.
FAQ: Commercial Leases and Voluntary Administration
Can I terminate the lease for rent arrears the moment I find out my tenant is in administration?
No. Section 440C prevents you from terminating or recovering possession during the administration without court leave or the administrator’s consent. The only exception is the limited 5-business-day window for pre-existing defaults.
Is the administrator personally liable for rent during the administration?
Yes — after the first 5 business days. Rent incurred while the company continues to occupy the premises after the initial 5-business-day period is an administration expense that the administrator is personally liable for under section 443A of the Corporations Act.
What happens to my lease if a DOCA is approved?
You are bound by the DOCA under section 444G, regardless of whether you voted for it. The DOCA may provide for lease continuation, modification, assignment, or termination. Participating in the creditors’ meeting with legal advice is the best way to protect your position.
Can the liquidator disclaim my lease?
Yes. Under section 568 of the Corporations Act, a liquidator can disclaim a lease as onerous property. This ends the company’s obligations but also ends your ability to recover ongoing rent from the company. Your pre-disclaimer arrears rank as an unsecured creditor debt.
Does a personal guarantee survive the company’s insolvency?
Usually, yes. A guarantee given by a director or other person for the company’s lease obligations typically survives the company’s insolvency, including voluntary administration and liquidation. Enforcing the guarantee against the guarantor personally may be your most effective recovery option.
Speak to Boss Lawyers About Your Commercial Lease
Commercial lease disputes during insolvency are time-critical. The 5-business-day window, the creditors’ meeting voting strategy, and the decision to seek leave from the court all require immediate, specialist advice.
Our insolvency lawyers in Brisbane regularly act for both landlords and company directors navigating the intersection of commercial leases and corporate insolvency. We can advise you on your rights under section 440C, help you register your claim as a creditor, and represent you in any court application for leave to recover possession.
We also advise directors and administrators on voluntary administration outcomes, Deeds of Company Arrangement, and all aspects of the commercial litigation that can arise in insolvency contexts.
Call Boss Lawyers on 1300 267 711 or contact us online to speak with an insolvency lawyer today.
This is general information only and is not legal advice. The law in this area is complex and the consequences of delay can be severe. You should obtain professional legal advice specific to your circumstances.
