How to terminate a commercial lease for non-payment of rent or other breach

It is a situation landlords hope they will never experience. Their tenant has stopped paying rent and they need to take action to mitigate the damage to their bottom line.

But how does a commercial investor go about evicting a tenant who has stopped paying the rent (financial breach) or breaches the lease in another way (non-financial breach)?

Unfortunately for landlords (but fortunately for tenants!), if you have a problem with your tenants, you can’t just issue an eviction notice, minimise your losses and move on.

The landlord must be diligent
 in following the correct
 procedures set down by
 the relevant legislation
when addressing a breach in a
Commercial Lease Agreement.

There are certain procedures that must be followed, or you might end up in court at the suit of the tenant, over technical or practical flaws in the way the breach was handled.

Commercial leases are covered by state specific legislation which outlines how a breach should be handled. 

For example, if you are in New South Wales, your commercial lease will most likely be covered by the Conveyancing Act, the Real Property Act and, if it is also classed as a retail lease, by the Retail Leases Act.  This article is written on the basis that the Conveyancing Act and Real Property Act apply (ie. to a factory, warehouse or other type or non-retail commercial property).

The terms contained in the lease agreement itself will also come into play when dealing with a breach of lease.

Explanation of terminology

Re-entry - "Leases also frequently include a right of re-entry allowing the lessor to reclaim the property if the lessee fails to abide by the terms of the lease. When the lessor exercises the right of re-entry and reclaims the property, the lessee has no further right to the premises. However, the lessor may have to take reasonable care to prevent damage to any Personal Property left on the premises by the lessee." Source - Legal Dictionary.

Forfeiture - If the Tenant hasn't paid the rent, the landlord can declare the tenant's rights, and the lease, forfeited by the tenant's breach. The tenant will be liable for landlord's damages, including unpaid rent not paid by a another tenant, forfeiture costs, damages to the premises, advertising costs, etc

If a tenant has breached the lease, either by failing to pay rent, or in some other way, the landlord must follow a certain procedure before the tenant can be evicted.

This is a general guide only and will vary slightly from state to state, depending on the state specific legislation that applies and the particular terms of your lease.  For example, in New South Wales, section 129 of the Conveyancing Act, 1919 states that before a right of re-entry or forfeiture under any provision of a lease (for breach of the lease) is enforceable, the lessor must first serve on the lessee a notice that:

• specifies the particular breach;
• if the breach is capable of remedy, requiring the lessee to remedy the breach; and
• in the event the lessor is claiming compensation, requiring the lessee to pay the compensation.

This requirement does not apply to re-entry or forfeiture in the event of non-payment of rent (sub-section (8) of s 129 Conveyancing Act).  However, most leases will still require the landlord to give a notice to remedy a breach of non-payment of rent, so make sure you look to the terms of your lease in this regard.

The Conveyancing Act requires the notice to remedy the breach to be in the form prescribed by the Act (contained at schedule 6 of the Act), or in a similar form.  A copy of the prescribed form appears below.

If the lessor has not given the tenant the necessary notice before enforcing a right of re-entry or forfeiture under a commercial lease, the tenant may personally bring a suit against the lessor and apply to the court for relief.

The right steps to take

If you find yourself in a situation where you need to take steps to exercise your right of forfeiture or re-entry, the general procedure (depending on the state based legislation that will apply to you and the specific terms and conditions of you lease), is as follows:-

• Identify the breach. In what way has the tenant breached the lease or legislation?  This might be a financial breach (for example, the non-payment of rent) or a non-financial breach (failing to keep premises in a certain state of repair);
• Give the tenant written notice to remedy the breach. In your notice, specify the particulars of the breach and request the tenant remedy the breach (if the breach is capable of remedy and most are) within a stated reasonable timeframe.  You should also state the steps that may be taken to remedy the breach.  If compensation is payable, stipulate any compensation that you may require the tenant to pay.  To summarise, the notice must:
  • be dated;
  • identify the lessee and be correctly addressed to the lessee;
  • identify the lease;
  • identify the provision of the lease that has been breached;
  • set out the rectification required;
  • stipulate the reasonable timeframe by which the remedy must be completed;
  • stipulate any compensation that is required to be paid (if any);
  • contain any other mandatory information set out in the state legislation, such as this warning to the tenant contained in the prescribed form notice to remedy of the Conveyancing Act, NSW:

“Note: the lessor will be entitled re-enter or forfeit the lease in the event of the lessee failing to comply with the notice within a reasonable time. See Section 129 of the Conveyancing Act 1919.”

• If the tenant does not remedy the breach in the allotted time, the landlord can terminate the lease, for example, by re-entry, notice or initiating court proceedings.

A common cause of court battles

Litigation battles over the validity of notices to remedy or whether a lease has been validly terminated are rampant in the court system.  As such, it is imperative that landlords ensure the validity of the notice.

It is vital that the notice is correct both factually (that is, the details of the breach are accurate and correct) and in form and content (that is, the notice is in the correct prescribed form or similar, contains all of the required information, and otherwise technically complies with the requirements of a valid notice to remedy).

If the notice is found to be invalid, (for example, the form contains technical errors or the circumstances of the breach are not accurate), then the lessor may have to re-issue fresh notices and start proceedings anew.

 Download Word Doc of Notice of Breach.

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Separation can take place by one or both parties moving out of the main residence. However, if that is not convenient or possible, you can separate “under the one roof”. The reasons why a couple may choose to separate “under the one roof” are many and varied. Usually it is done for financial reasons and as a short term arrangement until the family home is sold or finances are re-arranged, giving the parties the funds to move forward read more

Secured Loans and Personal Property Security Register

People borrow and lend money for all sorts of reasons. It may be a close friend short of cash or Uncle Tommy needs money to renovate his house?  Apart from the issues of what happens if the borrower fails to repay the loan, what happens if someone dies and there is no paper trail to say what was agreed to if anything?

If you are lending money to another party with an item of property offered as security then you must under the new PPSA (Personal Property Securities Act 2009) clearly document that property.

It doesn’t matter whether the property is tangible (eg, car, boat, plane) or intangible (eg, shares, patents), it must be registered.

We have revised our Secured Loan Agreement so that it contains all the provisions required to document a loan arrangement, including those required by the PPSA. This means that the lender can register their interest on the Personal Property Security Register (PPSR) so they have the rights to that property as security in the event that the loan is not honoured.

For more information go to “What do I need to know about the Personal Property Securities Act?”  at http://www.rpemery.com.au/articles/about-ppsa-loans.html

Or view our Revised Secured Loan Agreement at http://www.rpemery.com.au/online/loan-agreements.html

Difference between assigning a lease and subletting

“Assigning” and “subletting” may sound like interchangeable terms but are vastly different.

If you have space in your leased premises that you are thinking of assigning or subletting to another, you should make yourself familiar with the legal effects, the pros and the cons of both assigning and subletting.

What is an assignment of lease?

Where a tenant decides they no longer wish to be bound by a lease, they can transfer all of their rights and obligations under the Lease to another (with the landlords consent), who then assumes the position of tenant.


What is a sublease?

A Sublease enables a tenant who has spare space  that is not being utilised to sublet that space to another.

The Sublease is essentially an Agreement between the sub-lessee and the existing tenant.  The existing tenant will still ultimately be responsible to the landlord, even for defaults of the sub lessee, for example, non-payment of rent or damage to the premises. 

For more information click here

2013 Updates to the Western Australia Residential Tenancy Laws

The Western Australian Residential Tenancies Act 1987 has recently been reviewed and amended.

Here is a summary of the main changes starting 31 July, 2013.

1. A new prescribed form must be used for all residential tenancy agreements.
2. Requirement to lodge security bond with Government Agency.
3. Requirement to complete Condition Reports at start and end of tenancy.
4. Limits to option fees.
5. Pet bonds can be requested for all pets capable of carrying parasites that can affect humans.
6. The tenant cannot be made to pay more than 2 weeks rent in advance at any time throughout the tenancy.
7. The lessor must ensure the residential premises are reasonably secure.

To Download an up to date WA Tenancy Agreement Kit please visit http://www.rpemery.com.au/online/residential_tenancy_agreement_wa.html

5 key issues that will affect your bottom line when entering a Commercial Property Lease

5 Tips of things to look for in a Commercial Property Lease

Are you signing up or thinking of signing a commercial lease?  Here are a few key provisions to look out for.

Rent

The biggest outlay when renting a property is rent so it’s vital to understand the potential monetary obligations. You need to know how much, how it is calculated and whether it will automatically increase (often referred to as rent reviews or rent adjustments). 

Ratchet clauses

A ratchet clause is a clause which attempts to prevent any decreases in the rent.

Ensure that your lease review provisions are clear and that there is no attempt to prevent a legitimate decrease in the rent.

Outgoings (operating expenses)

Sometimes a tenant is required to contribute towards the outgoings (or operating expenses) of the leased premises.  These operating expenses can include things like rates, taxes, cleaning costs for the building, insurances and the like.

Other Expenses

The Lease may place other financial or related obligations on the tenant eg fixtures, fittings, equipment or services, etc

Lease term and options

The term of the lease is the amount of time you can rent the shop for under the Lease, eg 5 years.  At the end of the initial term of the Lease, there may be an option for the tenant to continue on under the Lease for a further term or terms.  Make sure you check the way rent is calculated for the option period as sometimes it can vary.

See full article at here

How To Use An Employment Contract Template To Streamline Recruitment

How an Employment Contract template can streamline your recruitment process

Recruiting and employing staff is fundamental to any business, large or small. If you’re not used to the process of putting on new staff it can be easy to overlook important legal requirements which can cause hassles down the track.

That’s where Employment Contract Templates come in – they can be used as a handy guide or checklist to ensure that all the essential legal stuff is taken care of.

When you sit down with your new employee – go through the contract together. It will cover important issues like payment and the award (if applicable), hours, the role of the employee, tasks, confidentiality and so forth. The contract ensures that both parties understand their obligations in the relationship and reduces the likelihood of conflict down the track.

A written Employment Agreement provides a solid record of your arrangements and starts your professional relationship in the right way. 

To see full article go to
http://www.rpemery.com.au/articles/employment-contract-templates.html

Estate Planning and Financial Agreements

Financial Agreements are an effective way for couples (married, defacto, separated or divorced) to determine the division of assets and/or liabilities in the unfortunate event of a breakdown in the relationship, however it does not take the place of a valid Will.

A Binding Financial Agreement or BFA will continue to operate despite the death of a party but it does not set out how a party wishes to have their assets distributed upon their death.

What if there is no Will?

If a Will is not in place, any assets and liabilities will be dealt with according to strict rules and procedures governed by the legislation of your particular State. This may result in a lengthy process which does not take into account your personal situation or your preferences of who is to receive your assets.

When should a Will be reviewed?

It is advisable to review your Will frequently to ensure it still reflects your wishes as your life changes. For example,  you should review your Will in the following situations – marriage (or de facto cohabitation), separation and divorce, birth of children, death of beneficiary, spouse, executor or trustee click here to read more

for more information click here

What costs nothing and ensures your Voice is heard?

Answer: Power of Attorney Document.

A Power of Attorney is a document that allows us to voice our decisions at a time when we are absent or unable to speak for ourselves.

It could be that you are away from home, for example, on holidays and need someone to take care of financial matters like bills, banking, shares etc. This is called a General Power of Attorney.

Or it could be the long term arrangement we put in place for financial matters in case we lose mental capacity due to illness or accident. This is an Enduring Power of Attorney.

Or it can be the document that sets out the medical or lifestyle decisions you would like to be made on your behalf when you are no longer capable of voicing them yourself. This is called Guardianship.

No matter which scenario, a Power of Attorney (General or Enduring) or Guardianship is a straightforward document that costs nothing but your time to implement.

We’ve spent some time researching what documents are available for each Australian State and have put all the documents together in one place for your convenience. You can choose which document you need and download them free of charge. Click here

We’ve also put together information pages to help you understand how Power of Attorney documents work. Go to www.rpemery.com.au

Whether you need one for yourself or for a family or friend – please use the resources and put it in place so you can rest easy knowing your voice will be heard no matter what.

Latest E Magazine From RP Emery

We have just published our latest e-magazine which is full of great ideas and articles. It's well worth a read, you never know what you will pick up from it.

Click here to check it out

What is a prenup

What is a prenuptial agreement?

A pre-nup agreement is now referred to as a Financial Agreement under the recent amendments to the Family Law Act.

A pre-nuptial (or Financial Agreement) allows parties to a relationship to make a formal agreement before the wedding about their assets and/or liabilities.

To find out more about our easy prenuptial agreements please click here

Website Privacy Policy Template

Free Website Privacy Policy Template

If your website collects any visitors personal information, you should have a privacy policy in place. It is also seen by major search engines now as a must have for credibility.

A solid privacy policy is actually very simple to do. Just follow the link below to get yours for FREE.

We are giving away a FREE Website Privacy Policy - please click here

Last Will and Testament

LAST WILL AND TESTAMENT

None of us like to think of our life coming to an end, but in reality, we all need to be prepared for that time. Upon our passing our property will either be dealt with by the State, or in writing of our own which is also known as a Last Will and Testament. Making a Will does not necessarily need a lot of time or effort, but making sure it is done right is important. There are laws that handle how a person’s property is handled after their death, and you must be sure you meet the proper requirements.
For more detailed information and to download an easy to use Legal Will Kit, please  Click here

Employment Agency Agreement

This Employment Agency Agreement is to be used by a temp agency or employment agencies or where staff are recruited on behalf of another company or business.

 It lays out a relationship between your client and yourself. Everything needed is all clearly stated in this agreement. It will help to ensure your relationship with your client continues safely.

For more information and to get a copy of this agreement please click here

What is a Land Lease Contract?

A Land Lease allows a livestock owner defined rights to work or use the land for the purpose of creating a profit.  Our Land Lease allows you to document the rights and obligations of both the livestock owner and the land owner.  You are able to tailor the Agreement to suit your own circumstances.

The RP Emery Agricultural Land Lease balances the shorter term interests of the farmer to work the land for profit, with the land owner’s overriding interest of maintaining the long term viability of the land. 

For more detailed information and to get a copy of this agreement please click here

Separation Agreement for a Married couple under sect 90C of the Family Law Act

Is a Separation Agreement right for you and will it work?

If you are a Married couple under sect 90C of the Family Law Act and you are just dealing with assets and liabilities - house(s), property, and debts etc Then yes, this separation agreement kit will cover all of that easily.

If there are maintenance or custody of children involved it might be that you need a Child Support Agreement(read more here) and/or a Parenting Planclick here.

You can also view commonly asked questions or FAQ's about Separation Agreements.right here.

Rental agreements and communicating with tenants in Australia

Rental agreements and communicating with tenants

Landlords often need to be in contact with their tenants. Whether you're allowing some alterations, informing them of an inspection or giving them notice, these types of contact are prescribed by the Residential Tenancies Act and Regulations.

Put simply - contact with a tenant needs to be done in a particular way and sent within a specific time frame. If not then you may find yourself on the wrong side of the law.

Here is a simple solution to prevent any future problems CLICK HERE

Agistment and the Law

How do you agist livestock?

Agistment is the placement of livestock from one location onto another for food, water, and housing - in return for a fee of some kind.

For a landholder agreeing to the agistment, there are things that should be negotiated and agreed on. This really should be in writing so that all parties are aware of their responsibilities. A written agreement details the terms and reduces the chances of a dispute arising.

An agistment contract and more information can be found at www.rpemery.com.au

Equipment Rental Agreements

Equipment Rental Agreements

An Equipment Rental Agreement may be used where a person or business wishes to rent out equipment for use by another. The type of equipment is variable, anything from bikes and exercise equipment, lawn mowers or property maintenance equipment, construction equipment, musical instruments, computers or office equipment - the list is endless.

Essentially, this agreement sets out the terms that will govern the hire - it covers the rights and obligations of both the Owner of the Equipment and the Hirer. It also addresses some of the unexpected issues which may arise so that you can minimise uncertainty and protect the Owner of the Equipment against loss and/or damage.
Equipment Rental Agreement Download available fromRPEmery & Associates website here

Parenting Plan Template and Child Support Agreement

A child support agreement is used by parents as a way to work out their own child support arrangements.

It has many advantages;

• deciding for yourselves without the need for court proceedings
• reduced financial and emotional costs of having to use the court
• more open communication with your former spouse or partner
• your ongoing relationship as parents, is likely be much easier and
• you are able to move forward with your life with much less stress

The best arrangements are those that the parents have discussed and agreed between themselves.

Get Your Parenting Plan and Child Support Agreements from www.rpemery.com.au