Most leases provide the Lessor (Landlord) the right to seek the early termination of a lease due to a breach of covenant or breach of an essential term by the Lessee (tenant). The covenants of a lease vary from lease to lease in any particular Commercial Lease or Retail Shop Lease. The destruction of premises, failure to have insurance or failure to pay the rent or outgoings are just some examples of a breach of covenant.
Usually, the Lessor is required to provide the Lessee with a Notice to Remedy Breach of Covenant before it can terminate the lease. The validity of the Notice to Remedy Breach can often be disputed. It is important to have a solicitor draft the Notice as an invalid notice not only causes delays but can also be a costly mistake.
The Lessor must give the Lessee notice in a particular form. The Lessor should issue a Form 7 Notice to Remedy Breach of Covenant, issued pursuant to Section 124 of the Property Law Act 1974 (Qld). The Notice must:
It must also be served as per certain requirements.
The Lessor must allow the Lessee reasonable time to remedy the breach, if it can be remedied. This is an important factor because if the Lessor fails to give the Lessee reasonable time to remedy and subsequently terminates the lease, the Lessee can challenge the termination of the lease. What is considered a reasonable time will depend on the particular circumstances. Some breaches can’t be remedied.
The Court will consider:
If issuing a Notice of Breach of Covenant, it is important to be clear about what an adequate response to the Notice would be and when it is reasonable to expect the response.
The Courts hold a strict view on the compliance of a Form 7 Notice. This was evidenced in the Queensland Supreme Court decision of Tyrell & Anor v Jescro Enterprise Pty Ltd. In that case, the Lessor served a Form 7 Notice to Remedy Breach of Covenant on the Lessee.
The Notice omitted a “note” which appears on the approved version of the form. Despite the information from the omitted note being conveyed to the Lessee in correspondence accompanying the Notice, the Court found that missing this Note rendered the Notice invalid.
Failing to provide a Notice to Remedy Breach of Covenant or a valid Notice to Remedy Breach of Covenant or serve it properly can have serious consequences. For example, if the Notice served is found to be invalid, the Lessee may have right to compensation for loss and damages if they were locked out of the Premises on the basis of the Notice.
If you have a Tenant who has breached a covenant of a lease, or you have been served with a Notice, contact us now to draft a valid Notice to Remedy Breach on your behalf to avoid any challenge in Court or make sure the Notice you have received is a valid notice.
It is essential you have experienced solicitors when dealing with a commercial lease or retail shop lease or a dispute about one. If you need to serve a Notice to Remedy Breach or you have been served with one, our commercial law team will make sure your rights are protected.
Aitken Whyte Lawyers Brisbane
2/414 Upper Roma Street
Brisbane QLD 4000