When a tenant and landlord of a commercial property are in dispute often the first remedy a landlord will look for in this position is to evict the tenant and get a new tenant in as soon as possible.
In a commercial lease, provision for evicting a tenant is commonly included into the lease in a provision such as this;
“If the tenant has continually breached an essential term of the lease, for a period in excess of 14 days, whether demanded or not, the landlord may lock out the tenant and repossess the premises”
Provision such as these provide the landlord with a remedy that they can take into their own hands and attempt to recover some of the losses suffered due to the tenant in breach.
If a tenant that has been ousted under such a provision and feels that they either have not breached the lease or that the breach was trivial in nature the tenant can apply to the court to be returned to occupy the premises. This is done by seeking relief against forfeiture of a lease. It involves an application for an injunction supported by an affidavit seeking an order that the landlord allow the tenant to move back into the premises.
Section 129 of the Conveyancing Act 1919 sets out the process that the landlord must take before re-entering the premises.
- Issuing a notice to the tenant describing of the breach has occurred
- Providing a reasonable time frame for the tenant to rectify the breach
- If the breach is not capable of being rectified, the landlord is to state an amount to be paid as compensation along with their calculations as to how this figure was reached
However section 129 does not apply where the breach is a breach for non-payment of rent, there is no obligation at law to give notice before terminating elects for non-payment of rent.
When will the Court grant relief against forfeiture?
The court will consider the following factors when determining whether to grant relief against forfeiture:
- Whether are the breach was willful, serious and repetitive in nature
- Was proper notice of the breach provided by the landlord pursuant to section 129 of the act
- Whether the breach relates to non-payment of rent that has since been remedied
- Whether the tenant has previously been evicted by the landlord for similar reasons
- Whether the landlord holds a bank guarantee which would be enough if called upon to remedy the breach
What happens if the Court grants for relief against forfeiture?
If relief is granted by the court the tenant will be allowed to re-enter the premises and a new lease will be entered into on the same terms as the previous lease, for the remaining duration of the previous lease. The landlord will be restrained from taking any further action in relation to the particular breach which is the subject of proceedings.
In order to minimise the risk of tenants seeking relief against forfeiture, before terminating lease and taking possession of its premises, a landlord should:
- Obtain legal advice regarding their specific situation
- Issue a notice specifying the breach of lease and stating how the breach can be remedied
- If the breach is not capable of remedy, compensation payable by the tenant with details of how compensation is calculated
- Provide reasonable period of time in which to remedy the breach
- Document attempts to come to an amicable resolution before terminating the lease and taking possession of the premises.