Lessor Alert - Why The Preparation of a Breach Notice Matters

When a notice is required

If a Tenant fails to comply with its obligations under a Lease, the Lease will generally give the Lessor the right to re-enter or forfeit the Lease. However, in most cases, before a Lessor is entitled to enforce any right of re-entry or forfeiture it may have under the Lease, it must serve the Tenant with a notice in accordance with section 124 of the Property Law Act 1974 (Qld) (Act).

Section 124 of the Act

Section 124 of the Act requires that a notice:

  • specify the particular breach complained of; 
  • if the breach is capable of remedy, require the lessee to remedy the breach; 
  • if the lessor claims compensation for the breach, require the Tenant to pay the compensation; and 
  • where the breach is capable of remedy, give the Tenant a reasonable time after service of the notice to remedy the breach.

The prescribed form for giving a notice under Section 124 of the Act is a "Form 7 Notice to Remedy Breach of Covenant" (Form 7).

What are the risks of an invalid notices

It is critical that a Lessor takes extreme care when preparing a Form 7. Where a Lessor fails to provide a Tenant with a valid Form 7 (or provide any Form 7 at all), any subsequent re-entry of the leased premises or forfeiture of the Lease by the Lessor is likely to be unlawful and ineffective.

This exposes the Lessor to a number of risks such as an application for relief against forfeiture, a claim for damages and adverse cost consequences (as well as uncertainty about reletting the leased premises).

Some examples of invalid notices

Historically, the Courts have not been lenient when considering how possible defects in the preparation of Form 7's affect their validity. For example, the failure of a Lessor to include the prescribed "Note" at the bottom of a Form 7 has been found sufficient to render that Lessor's subsequent termination of its lease to be invalid.

Another issue that commonly affects the validity of Form 7 is a failure by the Lessor to provide its Tenant with a reasonable time after service of the notice to remedy the breaches of the Lease. What is considered to be a reasonable time will vary by reference to the nature of the breach so it requires careful consideration.

The above is not an exhaustive overview of matters that can operate to invalidate a Form 7.     

It is important that any Form 7 issued by a lessor strictly complies with the Property Law Act 1974 (Qld). Our commercial team can assist lessors to prepare Form 7's and to review the compliance of Form 7's received by a tenant.

For any queries or to speak with a lawyer about any commercial matter, call our office on 4052 0704. 

 

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