Liquidation Question

[KimH]

I have a friend in Gauteng that posed an interesting question to me yesterday regarding commercial rental and liquidation and I was hoping one of the legal brains on here could shine some light.

Scenario:
Friend is a commercial rental agent - her largest client has just commenced the liquidation process. The building will form part of the liquidation process and has an 80% occupancy - common sense tells me that in a case like this any rental income obtained will more than likely be put into a trust account during the liquidation process and will eventually be disbursed to the various creditors, the building will be sold and any proceeds from this will also form part of the disbursements - I cannot see them kicking out tenants and shutting down the building?

If this is the case, does my friend still have a right to her monthly commission or does she form part of the creditors and be expected to lodge her claim with the liquidators?

Any insight would be most welcome.

[Dave A]

Assuming the building is owned directly by the liquidated entity, essentially the estate is under new management. If I were your friend, I'd approach the liquidator for instructions as quickly as possible.

The liquidator is faced with either terminating the contract (which could incur penalties and any outstandings at that point would probably become part of the claim by the general body of creditors) or,

appointing your friend to continue managing the collection of rent etc as before, in which case I expect your friend's fees would be part of liquidation costs and she could expect full payout on those fees going forward.

If the buidling is not owned directly but is enclosed in a subsidiary company, your friend can probably carry on with business as usual for the time being.

[KimH]

Thanks Dave, I have also told her to get in contact with the liquidators as soon as possible.

It's mind boggling how many companies are taking the liquidation route these days, more poor sods joining the ranks of the unemployed! The small business sector is going to be bigger than corporates soon...

[sterne.law@gmail.com]

In terms of the building -
If it is paid up, that is no mortgage, the leases need to be honoured. If it is still mortgaged, then if a sale can not be made with the leases intact, then they may be terminated. There are the normal contractual consequences.
Being a commercial building any investor would probably want it leased. The trustee and creditors may also decide that continued rental income is better than a sale.
Like Dave, I would also suggest making contact with the liquidaotor in term sof continued service. They will most probably want you to continue and asign the fees to liquidation costs and not as a creditor.
Your friends position will be influenced by the contract. There may be a clause dealing with liquidation.
In the event of the sale of building the contract will end. Again the contract will determine any damages which will be a claim against the liquidated estate. (Once consulting with liquidator, seek an independent opinion)

[KimH]

Many thanks Anthony and Dave - I have passed on your comments.