When times get tough it is worthwhile knowing where you stand with your lease if you are a tenant who has not been keeping up with rent payments, or if you are a landlord and your tenant has not been paying the rent.
In addition to any rights that the landlord will have to sue a tenant for unpaid rent arrears, a landlord may also look to cancel the lease where the rent has not been paid. If a landlord does want to take up this option then there are some fundamental requirements that they need to comply with under the Property Law Act 2007 before they can begin any action to cancel the lease. Those are:
- the rent (or any part of it) must be overdue by at least 10 working days from the rent payment date, and
- notice of intention to cancel the lease must be served on the tenant giving them 10 working days from the date of serving the notice to pay the outstanding arrears, and
- at the expiry of the 10 working day period the rent or any part of it is still unpaid.
It is important to note that the rent does not have to be overdue for 10 working days before the notice can be served – a landlord can serve a notice as soon as a rent payment is missed and the 10 working day period starts running from the date the notice is served.
The notice served on the tenant needs to strictly comply with several requirements in the Property Law Act. It is only after the notice period has expired that a landlord can then exercise their right to cancel the lease (provided that the tenant has not paid all outstanding arrears). The expiry of the notice period does not mean that the lease is automatically cancelled on expiry of the 10 day period and further notice to the tenant that the lease has actually been cancelled will need to be served.
Cancelling a lease can raise various issues, so it’s important to talk to your lawyer before attempting to cancel a lease for non-payment of rent, or any other breach of the lease. The correct procedure needs to be followed – if you attempt to cancel a lease without the legal right to do so or without following due process, you are could potentially be liable to the tenant for damages.
Our commercial property team will be happy to discuss your situation with you and advise you on the best course of action.
Our thanks to Jared Cains for writing this article