The rules that apply when you evict a tenant are tricky. If you get it wrong it can cost you dearly, as this landlord found out.
This lesson is to be learned from events that involved the Central City Backpackers and Embargo Bar in Auckland. The tenant was behind in the rent. After the rent had been overdue by 13 days the landlord took the premises over by changing the locks, cancelling the lease, issuing a trespass notice and seizing the tenant’s chattels. The landlord then started its own similar business on the premises.
The only problem was that the landlord had acted one day too soon. The lease said that the rent had to be overdue by 14 days before the landlord could retake the premises.
A year later the landlord demanded rent arrears of $1.3 million. The tenant sued for damages because the landlord had acted too early and had therefore breached the lease.
The case went all the way to our highest court, the Supreme Court. The tenant won and got damages of $200,000 from the landlord because the landlord breached the lease by acting one day too soon. This was because at the time when the landlord acted it had no right to cancel the lease – by acting to soon it had “repudiated” the lease, giving the tenant the right to get damages.
The case would have been quite different if the landlord had simply waited one more day and followed the lease terms. The landlord was not treated by the court as a landlord recovering premises from a defaulting tenant. Instead it was treated as a landlord evicting a tenant who was still entitled to remain in possession, albeit for less than 24 hours.
This whole saga carried on over a number of years and would have carried with it huge amounts of stress, time and legal and other costs.
The lesson is that you must treat cancellation of any contract, and leases in particular, very carefully. Make sure you are meticulous in what you do.