Australia: A landlord's right to terminate a lease: Is a Notice to Remedy Breach first required to be given in every case?

Last Updated: 13 July 2016
Article by Anthony Pitt and Greta Carew-Johns

Section 124 of the Property Law Act 1974 (Qld) (PLA) provides protection for tenants before a landlord is able to take the significant step of terminating a lease pursuant to a right of re-entry or forfeiture under any provision in the lease.  

However, as Special Counsel Anthony Pitt and Solicitor Greta Carew-Johns discuss in the following article, a recent District Court of Queensland decision demonstrates that this is not always necessarily the case.  

Wash Investments Pty Ltd & Ors v SCK Properties Pty Ltd & Ors [2016] QDC 77

On 14 April 2011, the plaintiffs (tenant) entered into a lease with the defendants (landlord) for an initial period of ten years for premises to be used as a car wash business.  However, within 6 months, the business began to experience financial difficulties and thereafter fell behind on the payment of rent and outgoings under the lease.

A Notice to Remedy Breach of Covenant pursuant to s124 of the PLA (First Notice) was sent to the tenant on 8 August 2012 in respect of rent and outgoings owing at that time.  The parties disputed whether those breaches were rectified in full or not, but the business continued to struggle with the result that the tenant was significantly behind in rent and outgoings by the following year.  During this time, there had been persistent requests by the tenant to the landlord to reduce the rent payable because of the tenant's inability to pay.

This resulted in a further Notice to Remedy Breach of Covenant pursuant to s124 of the PLA (Second Notice) being sent to the tenant on 4 June 2013. 

On 19 June 2013, the tenant's solicitor sent a letter to the landlord who made it clear that unless the landlord urgently reduced the rent, the tenant could not continue trading and would have to declare bankruptcy. 

On 25 June 2013, the landlord re-entered and took possession of the premises. 

There were a range of matters in dispute between the parties relevant to the above facts.  One of these, which was considered at length in the judgment, was whether the Second Notice was: prepared by the landlord; properly served on the tenant; and received by the tenant before the landlord terminated the lease and re-entered the premises.   This was because the tenant claimed not to have received it. 

However, the Court found that any deficiencies with respect to the Second Notice did not matter because the tenant's solicitor's letter of 19 June 2013, together with the tenant's continued arrears of rent and outgoings and persistent requests to reduce the rent payable, clearly evinced the tenant's intention to no longer be bound by the terms of the lease.  The landlord treated this conduct (and the court agreed) as a repudiation of the lease by the tenant.

The Court confirmed that the Second Notice was not required to be given in circumstances where the landlord elected to accept the tenant's repudiation of the lease as per its common law right to do so, prior to the landlord terminating the lease and re-entering the premises. 

Importantly, the Court discussed that the tenant's conduct must be repudiatory and that a breach of a term (even an essential term) alone may not necessarily evince an unwillingness or inability to be bound by the terms of the lease.  The relevant conduct of the tenant in each case must be examined in order to determine whether it was in fact repudiatory. 

The tenant argued that the letter of 19 June 2013 was not repudiatory at all, and was only sent as a "bargaining tool", "to let them know we were serious because a solicitor had written the letter" and "because they knew we had been struggling".  However, this submission was rejected as the Court considered that the letter clearly indicated that, unless a rent reduction was given, the tenant would not, and could not, meet those obligations any longer.  The tenant also argued that s124 of the PLA must be complied with before a lease is terminated on any basis – but the Court decided that this argument was against the weight of case authority that said otherwise. 

The tenant was therefore ordered to pay the landlord $118,469.55 in damages for loss of rent and outgoings plus interest.

The decision serves as a timely reminder for landlords and tenants of the possibility of termination of a lease even where a notice under s124 of the PLA has not been served; as well as the care required to be taken in drafting correspondence to ensure that it cannot be taken on its own, or in conjunction with other conduct, as repudiatory. 

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

2015 AFR Beaton Client Choice Awards:
Best Law Firm (revenue $50m - $200m)
Best Professional Services Firm (revenue $50m - $200m)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions