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The Property Law Act 2007 ("PLA") codifies – very strictly – the process and means by which a commercial tenant may be evicted for non-payment of rent or some other breach of its lease obligations. Whether you are the landlord or the tenant, it is critical you understand your rights and obligations in an eviction scenario.
The most common reason for eviction is non-payment of rent and/or outgoings. Section 245 of the PLA states that a landlord may only cancel a lease for non-payment of rent if the rent is not less than ten working days in arrears, and the landlord has served on the tenant a notice of intention to cancel lease specifying the nature and extent of the breach, balance outstanding and consequences of non-payment. The tenant must be given no less than ten working days from service of the notice to rectify the default.
Service of the notice must comply with the High Court Rules but generally requires service on the tenant company's registered office, and upon all personal guarantors at their residential addresses. A failure to properly serve the notice may render it invalid (and the Courts frown heavily upon illegal evictions and can award significant damages to the ousted tenant).
Tenants need to be advised of their right to obtain independent legal advice and are entitled to query or contest the calculation of the amount claimed to be outstanding.
It seems somewhat ridiculous but, if a tenant has "done a runner" and vacated the premises, the landlord is still technically required to serve a notice to cancel and wait out the statutory time frame before re entering and seeking to mitigate its loss by re letting the premises.
Tenants should be aware that by vacating the premises they are not released from their legal liability. Whilst the landlord is required to seek to re-let a vacant property as soon as possible, the ex-tenant (and its guarantors) may legally be compelled to comply with their lease obligations for the balance of their lease term and, in addition, are liable for all of the landlord's reasonable costs in re-letting the property.
Suffice to say, the PLA heavily favours the tenant when it comes to an eviction scenario. Landlords face harsh penalties for illegal or invalid lease terminations and clearly the legislature has sought to protect the goodwill of tenant businesses. The preparation of the notice itself and the service requirements are a minefield for the unwary. Whether you are a landlord or a tenant, you should take legal advice to ensure your interests are best looked after in a lease termination.
If you have any queries, please contact:
Brandon Cullen | Partner | Albany Office
(09) 966 3609 | bcullen@mcveaghfleming.co.nz
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© McVeagh Fleming 2013
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.
