A recent New South Wales Civil and Administrative Tribunal (the Tribunal) decision raises important points to consider when drafting or considering the termination provision of a lease.
Depending on the terms of the commercial lease, a Landlord may re-enter and take possession of the premises for non payment of rent either without notice or in some instances with 7 or 14 days’ notice.
The Tribunal decision Charlie Bridge Street Pty Ltd v Petrazzuolo BC201900622 [2019] NSWCATCD 1 (Charlie Bridge case) brings into question, the validity of any provision in a commercial lease in NSW (and potentially other jurisdictions with similar statutory provisions) which requires a Landlord to give notice to a Tenant before terminating the lease by re-entry for non-payment of rent.
Background
In the Charlie Bridge case the Tenant had not paid rent within the grace period allowed under the lease. The Landlord notified the Tenant that the Tenant was in default, took possession of the premises and terminated the lease due to the Tenant’s non-payment of rent. The Landlord also changed the locks as permitted by the lease as part of re-entering and taking possession.
The Tenant lodged an application seeking damages and relief against forfeiture.
The Landlord did not give the Tenant notice, instead relied on a clause in the lease which provided that the Landlord could enter and take possession of the property if rent or any other money due under the lease was 14 days overdue for payment. Another provision in the lease had the effect of requiring the Landlord to give 14 days’ notice of termination in the case of non-payment of rent. However this other provision, the Landlord argued, was an alternate option and not a requirement.
The Tribunal considered the Conveyancing Act 1919 (NSW) and the law relating to re-entry or forfeiture or relief in case of non-payment of rent. Section 129 (1) of the Act requires a Landlord to serve a notice to the Tenant which specifies the breach and requires the Tenant to remedy the breach (if possible) within a reasonable time after the notice. The same section does not prevent re-entry or forfeiture of a lease without prior notice in instances of non-payment of rent.
Accordingly the question of whether notice was required for non-payment of rent before re-entry was governed by the relevant Act rather than by the terms of the lease, and the Tribunal found in favour of the Landlord.
Implications
The Charlie Bridge case highlights the importance of carefully considering the termination provision when drafting or considering a lease.
For advice on lease termination or lease terms generally, whether you are a Landlord or a Tenant, please don’t hesitate to contact our friendly team of property lawyers.
