How to remove a defaulting tenant.

How to remove a defaulting tenant.

If your Tenant has failed to pay rent or is in breach of some other essential term of the Lease, you may decide that terminating the Lease and searching for a new Tenant is the best way for you to limit your losses.   It may be, for instance, that the tenant is impecunious.

Before you will be able to “change the locks” and re-enter your property, Section 124(1) of the Property Law Act provides that you must first serve on your Tenant a notice which states the breach complained of and what the Tenant has to do to remedy the breach.

It is in your best interests that any breach notice is issued correctly the first time.  You must ensure that the breach notice is factually accurate and complies with the technical requirements imposed by law.

Providing a defective notice can be costly.

Firstly, a defective notice may give the Tenant the ability to have the notice set aside. This would force you to re-issue the notice thus delaying your efforts to terminate the Lease. This may allow the Tenant to continue to occupy the Premises while in breach until such time as the notice is re-issued correctly.

Alternatively, the Tenant may seek relief from a court on the grounds that your termination of the Lease and re-entry was unlawful because of the defective notice. The Tenant may, in this situation, be entitled to damages or compensation as a result of the wrongful termination of the Lease.

Section 124(1) of the Property Law Act requires that the Tenant be given a reasonable time to remedy the breach after being served with a notice. It does not matter that the Tenant has, for example, stopped paying rent several weeks earlier. Your right to act pursuant to the breach notice does not arise until a reasonable time to remedy the breach has elapsed.

For the purposes of a breach notice it is not set in stone what a reasonable time to remedy a breach is. It largely depends on the circumstances of the breach. We suggest that the minimum period which should be allowed is fourteen (14) days however the longer the Tenant is given to remedy the breach the less likely it is that the Tenant will have grounds for relief against an unreasonable breach notice. You should always try to act quickly once the Tenant’s breach is realised rather that try to make up for lost time when issuing the notice.

You should also take great care as to how the notice is served so that there can be no dispute as the date that the notice was properly brought to the Tenant’s attention. In the case of individuals it should be served personally where possible and full details of service should be recorded. In the case of corporations the notice should be at least sent by registered post to the company’s registered office.

Upon being served with a breach notice a Tenant may attempt to negotiate a compromise. You should be careful that the Tenant is aware that any such negotiations and agreements reached there from are without prejudice to your rights under the notice. Failure to do so may lead to you having to the start the process all over again if the Tenant defaults under the terms of the compromise.

Collecting the information and drafting the notice succinctly and correctly can be a difficult and time consuming process. It can be costly and cause significant delays if it is not done correctly and efficiently from the outset.

You should contact a lawyer as soon as your Tenant is in breach and obtain advice as to your options and legal rights.

You should also be aware that tenants are generally entitled to make an application for relief, from the court.  If you do not allow the tenant an opportunity to apply for that relief then you may find that you face an application for substantial damages relating to the loss of the tenants business.  It is always best to tread carefully.

Riba Business Lawyers

Strength Through Knowledge

Franchising, Leasing, Acquisitions

Head office:  34 Duporth Avenue, Maroochydore, Sunshine Coast, Queensland.

Maroochydore:  07  54791488

Brisbane:  31032115