05 May 2017

What happens when a tenant is in breach of a lease agreement?

Where a tenant or lessee is in breach of their obligations under a lease, section 124 of the Property Law Act 1974 requires the landlord or lessor to issue to the tenant a ‘notice to remedy breach’ before exercising any right to terminate the lease.

To be effective the notice to remedy breach must:

  • be in writing;
  • be served on the tenant;
  • specify the nature of the ‘particular breach complained of’;
  • specify how the breach can be remedied;
  • if the landlord is alleging that the tenant owes money in compensation for the cost of issuing the notice this should also be specified in the notice; and
  • if the landlord is also claiming amounts for arrears in rent, this should also be clearly specified.

The landlord must give the tenant a reasonable time to comply with the notice to remedy breach before exercising any right of early termination under the lease agreement.  What is considered reasonable time will depend on the circumstances of the particular case, including the nature of the breach and what is required to remedy the breach.  The specification of a certain number of days does not mean that the time given is reasonable.

A recent decision of the Supreme Court, Tyrrell v Jesbro Enterprise Pty Ltd [2017] QSC 55 has reiterated the importance of issuing an effective notice to remedy breach to tenants.  In this case the tenant had failed to pay rent and council rates, the tenant was subsequently issued with a notice to remedy breach and when the tenant did not comply with the notice the landlord terminated the lease early.

When the matter came before the court, Justice McMeekin refused to declare that the lease had been validly terminated by the landlord because the notice did not include at the end of the notice the note which appears on the approved form, which is:

“NOTE: The lessor will be entitled to re‑enter or forfeit the lease in the event of the lessee failing to comply with this notice within a reasonable time.”

The court held that the notice was therefore defective and that there was not substantial compliance with the approved form.  Critical to the decision was that the letter only stated that the tenant may be liable to forfeiture and termination, not that the landlord would have a right to re‑enter and terminate if there was no compliance within a reasonable time.  The positioning of this note at the end of the notice and the reference to section 124 of the Property Law Act 1974 was also considered essential to bring to the tenant’s attention the serious consequences of non‑compliance.

If you are a landlord and require assistance with a breach of a lease by a tenant or you are a tenant who has been issued with a notice to remedy breach, our experienced property law team based in Cairns can assist you to comply with the technical procedures required to protect your interests.

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