It can be daunting to receive a notice stating you have breached your lease and are facing harsh penalties. However, once you get past the initial reaction, you may come to find that you do not need to pay the penalties as a result of the form being completed incorrectly, and this is not an unusual occurrence. Regardless of whether you are a lessor or lessee, you should be aware of how to identify a valid notice and what the implications are if the notice is invalid.
What is a Notice to Remedy a Breach?
A Notice to Remedy a Breach is a notice given by a lessor to the lessee advising them that the lessee has breached a term of their lease agreement. This notice can be used for both retail and commercial leases. The approved form is the Form 7 Notice to Remedy Breach of Covenant, which is available on the Queensland Supreme Court website. This is the form that should be used for breaches of retail and commercial leases that have a term of more than 1 year.
What should be included in the Notice?
Section 124 of the Property Law Act 1974 (Qld) advises that the notice should provide:
- specifics of the particular breach;
- if the breach can be remedied, then requiring the lessee to remedy the breach; and
- if the lessor is claiming monetary compensation, then a requirement that the lessee provides the monetary compensation.
Essentially, the Notice should be drafted with the purpose of identifying what the breach was and express any actions the lessee must take to remedy the breach. Identifying a time that the lessee has to remedy the breach can be useful. However, the due date should be reasonable as the Property Law Act requires lessees to remedy a breach within a reasonable time after being served the notice to remedy the breach. If a reasonable timeframe is not given, then the lessee may be able to challenge the validity of terminating the lease.
Effect of an invalid notice
Issuing an invalid notice can have disastrous effects on lessors. If the lessor terminates the lease and/or takes possession of the property after serving an invalid notice, then the lessee may be required to be compensated. This may be for loss of profits or damages suffered due to being unable to continue to trade in the leased premises. It is imperative that both lessors and lessees ensure the notice of breach meets the requirements. A lessor should be ensuring the notice is valid so have the option to terminate the lease and resume possession of the property without the concern of a court claim against them. On the other hand, lessees need to be able to know what the requirements are and if one thing is missing, consider making a court application as it may result in receiving compensation.
What to look out for
Here are some general tips for lessees to review the notice to ensure whether it is valid:
- has the lessor used the appropriate Form 7 Notice? If so, are there any words missing from the notice (which would typically be included in the Form 7 notice) as this may render the notice invalid. The court has determined a notice to be invalid because the lessor failed to include a note that would have been included if they used the Form 7 Precedent (Tyrell & Anor v Jescro Enterprise Pty Ltd  QSC 55);
- has the lessor entered the correct details for each party and the leased premises? These names must correspond with the lease documents (especially the lessee’s name). If the lessee’s name is recorded differently on the lease documents then the notice may not have been served on the true lessee;
- were you aware that you breached the lease before the notice was issued? This may assist in determining whether a breach of the lease has actually occurred; and
- if the breach is failure to pay rent and outgoings, whether the amount the lessor is claiming as compensation is the actual amount owing to them and not an inflated or excessive amount.
If you have any questions or require assistance with drafting, renewing or drafting your lease in Queensland, please contact the property team at NB Lawyers for more information.
Kayleigh Swift, Associate
Kayleigh Swift is an associate in our Commercial and Property team who assists with Employment Law matters. With a high level of experience in commercial and retail leasing, voluntary and involuntary purchase and sale acquisitions, property development and employee relations, Kayleigh provides practical advice to ensure smooth business transactions.
Chloe Skubis, Lawyer
Chloe Skubis is a Lawyer in our Property team who assists with various conveyancing transactions. Chloe is very experienced in residential conveyancing and is a problem solver. She always provides efficient service to all her clients.