It is a common scenario that when a business leasing premises from someone fails there will be a significant debt owed to the landlord. This is the case because usually under the terms of the lease, landlords can claim rent for the remaining period of the lease (i.e. another 4 years after the lease has been breached). Of course they have a duty to mitigate their loss by trying to re-let the premises as soon as possible however in practice this may not occur for some time due to having to clean up the premises and perhaps remodel to suit a new tenant.

We were recently engaged by an individual (let’s call him Jim) who had previously owned and operated a retail franchise in Queensland. So Jim signed a long term lease for premises space at a shopping centre.

Unfortunately his business started losing money and it ultimately had to be shut down and all its assets sold off to pay debts (unfortunately a common occurrence with franchises). However, there was a substantial debt still owed to the landlord (mainly for future periods under the lease) in the amount of $400,000.

In addition to this debt Jim also owed small debts to other trade creditors. However he felt that if he could settle the landlord’s debt he could pay off his other debts over time.

Debt Negotiation with the Landlord

When we were engaged the landlord’s solicitors had issued demands for payment and were about to commence court proceedings against Jim. Despite some heated discussions and communications we were able to eventually show the landlord’s solicitors that in the event of Jim’s bankruptcy they would not get anything and that the $28,000 being offered to them by Jim was therefore a far better offer. They accepted Jim’s offer in full and final satisfaction of the debt he owed and wrote off the balance of their debt.

While Jim still had some smaller debts he had to pay in full, dealing with the landlord meant he could move forward with paying his other smaller debts over time knowing the major debt he owed had been dealt with and the risk to him of being made bankrupt had been significantly diminished.  

If you are struggling with debts and concerned about bankruptcy get in touch on 1300 906 966or send us an email at to have a confidential discussion today.

Posted on 15-06-18 in Business insolvency, Debt management.