Insolvencies are easing overall, but not where most retail landlords lease
CreditorWatch's mid-2026 Business Risk Index found overall business insolvencies eased slightly across FY26, down 3.9% on the year before, but that average hides a split by sector: mining recorded the sharpest jump in insolvencies, up 35%, with retail trade close behind at 18%. Hospitality is sending an even clearer signal. CreditorWatch found more than one in eight cafes, restaurants and takeaway food businesses closed in the twelve months to July 2026, a 12.03% closure rate, almost double the 6.69% national average across all industries, and hospitality businesses are defaulting on supplier payments at close to four times the typical rate. None of that tells a landlord whether one specific applicant is a safe bet, but it's the backdrop against which "the tenant looks fine on paper" needs to be tested properly, not assumed.
Start with the company on the lease, not the name on the shopfront
A trading name tells a landlord almost nothing about who is actually liable if the rent stops. Before anything else, pull an ASIC extract against the exact legal entity and ACN that will sign the lease, not the trading name on the shopfront or a related entity that merely looks similar; a mismatch between the extract and the lease is one of the more common ways a landlord later discovers it is chasing the wrong company. A current extract shows the entity's officeholders and registered office as they stand today; a historical extract goes back to incorporation and will surface former directors, past names and earlier addresses, which matters when a director's trail includes other companies that didn't make it. Checking the officeholders also tells a landlord exactly who is available, and entitled, to sign a personal or director's guarantee.
A credit file and real references say more than a glossy pitch
Checking a prospective tenant's credit history through a commercial credit bureau has become standard practice for landlords and the agents acting on their behalf, and a credit file can surface prior payment defaults, court judgments, directorship links to other distressed companies, and an overall risk score that a verbal assurance won't. Pair that with the tenant's own financial statements and recent lodgements where it has a trading history, and call the trade and bank references it supplies directly rather than filing the reference letter without checking it. A Personal Property Securities Register search is worth running alongside the ASIC extract: it won't say anything about rent-paying capacity directly, but a tenant already carrying heavy secured debt against its other assets has less room to absorb a bad trading patch.
Make the security match the risk, not the custom of the building
A bank guarantee and a personal or director's guarantee do different jobs, and conflating them is where landlords get caught out. A bank guarantee is the bank's own unconditional promise to pay, issued only after the bank has run its own creditworthiness check on the tenant; a cash deposit held by the landlord, by contrast, can be clawed back by a liquidator as an unfair preference if the tenant becomes insolvent soon after paying it, while a bank guarantee is a separate contractual promise that generally survives the tenant's own insolvency. A personal or director's guarantee adds a second line of recovery against an individual once the corporate tenant can't pay, but it is only as good as that person's own assets, and enforcing it means a separate court or tribunal proceeding against them, not a quick call on a bank instrument.
A Bondi Hungry Jack's lease shows what happens when the sizing is wrong
In Heriot Pty Ltd v Williams [2024] NSWCATCD 35, the landlord leased two Bondi retail premises to a company running a Hungry Jack's restaurant, with the lease personally guaranteed by the tenant company's director. The only security the landlord actually held was a bank guarantee of $72,049.99. When the tenant went into liquidation, the landlord terminated the lease, re-let the premises (offering the incoming tenant a 12-month rent-free incentive to secure the deal), and then pursued the director personally for $627,232.30 in unpaid rent, damages and GST. The NSW Civil and Administrative Tribunal found the personal guarantee was a continuing obligation that survived the tenant's liquidation, and that the landlord had taken reasonable steps to mitigate its loss despite the incentive it gave the replacement tenant. It ordered the director to pay $543,493.40 personally. The bank guarantee the landlord actually held covered barely a tenth of that figure; the rest rested entirely on one individual's guarantee and his capacity to pay it.
A personal guarantee held up the same way in Lin v Solomon [2017] NSWCA 328, where the landlords of a Bella Vista shopping centre pursued a newsagency's guarantor after the tenant company paid only a deposit and a bank guarantee at the start of a five-year lease from 2009, then made no further rent or outgoings payments before the landlords re-entered the premises in December 2012. The guarantor argued he had been induced to sign by the leasing agent's misrepresentations about foot traffic from a nearby development, but the Court of Appeal found the alleged representations weren't made out, and that an experienced newsagent couldn't credibly claim to have relied on them regardless. The guarantor was ordered to pay $602,178.35 plus interest and costs. Both cases confirm a personal guarantee will be enforced on its terms; neither is a reason to treat it as a substitute for sizing the guarantee and the bank security to the actual risk before the lease is signed, since collecting a personal judgment afterwards is a slower and far less certain process than calling on a bank instrument that was adequate from the start.
None of these checks guarantee a tenant won't eventually fail. What they do is move the landlord's exposure to a point where it can actually be assessed and priced, through the security required and the incentives offered, rather than discovered for the first time after the rent stops arriving.