Tenant Breach may not mean termination!

In our last article we described how it is necessary for a Queensland landlord to issue a form 124 notice before taking any steps to retake possession of premises from a tenant who holds those premises under a Queensland Commercial Lease.

A commercial tenant will always have the right to apply to the courts for something called “relief against forfeiture”.   The relief may be given even if the tenant is in default of the lease and even though the lease specifically provides that the landlord has the right to terminate.

Courts have a wide and unfettered discretionary power to take into account all of the circumstances before deciding if the Court will allow a landlord to retake possession from a tenant.  Therefore a landlord may not have the ability to terminate a lease even if the tenant is in default.

A tenant cannot claim relief against forfeiture before the landlord has commenced proceedings for possession or has taken possession.

If the tenant anticipates that the landlord is making preparation to take possession then the tenant may apply for an injunction.  The tenant may do this once the section 124 notice is served.

So how does the court decide if it will grant this “relief against forfeiture”?

The court will consider:

  1. the seriousness of the breach (see  Ace Property Holdings Pty Ltd V Australian Postal Corporation [2010] QCA 55)
  2. whether there has been a serious disregard of the landlords rights over a period of time.
  3. damage to the landlord
  4. whether the default has been corrected
  5. the relative loss to the lessee if the relief is not granted
  6. the benefit received by the landlord resulting from the termination particularly for example if this benefit is derived as a result of the tenants improvements
  7. the future workability the relationship of landlord and tenant
  8. the likelihood of future breaches
  9. the landlords motivation Actall Pty Ltd v Pacific Bay Development Pty Ltd [2006]NSWCA 190
  10. any harm that may be done to third parties as a result of the forfeiture.

After considering these factors the court weighs up what the lessee would lose without relief, against what the landlord has lost as a result of the breach and what might be gained by the termination.

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