There is nothing more frustrating than a tenant who has not paid their rent. As a lessor, you have the right to evict the tenant when they fail to pay their rent or have breached other terms of the commercial lease. You must, however, follow a set procedure to ensure your eviction is lawful. If you fail to do so, and your tenant challenges you, the court may not uphold your eviction.
What is Eviction?
Eviction occurs when the lessor removes the tenant from the commercial premises, consequently terminating the commercial lease. Remember that not all breaches of the agreement give rise to the right to evict, and one of the following three criteria must be present to warrant an eviction:
- The breach must give rise to a right to re-entry or termination; or
- The breach must be considered fundamental or essential;
- The tenant’s breach must be regarded as a repudiation or disclaimer of the lease.
Commercial leases typically have a re-entry clause so as to allow the lessor to terminate the lease as well as to seek damages where the tenant has breached the agreement. In the past, leases that did not contain specific re-entry clauses prevented the lessor from terminating the agreement in the event of a breach. Express clauses are now commonly used so that the lessor can repossess the premises and terminate the agreement.
Re-entry is considered to be either a physical re-entering of the premises or the initiation of proceedings. Physical or actual re-entry commonly consists of changing the locks to stop the tenant from entering the premises. Other less direct but just as valid methods include serving notice of re-entry directly to the tenant or attached to the premises, or physically entering the premises and advising or demanding repossession from the tenant.
Notices need to be factually correct. They must clearly state the breach and the re-entry and not give another reason for the re-entry – such as that the lease had already come to an end for some other cause.
Timing is a key element in re-entry – a statement of intention to re-enter is not itself considered re-entry and if the method of re-entry occurs too early in the lease-prescribed timeframe, it may be considered invalid.
Fundamental Breaches or Repudiation
Termination of a commercial lease for a fundamental or essential breach works the same way as in general contract law. The lessor must notify the tenant that they are terminating the lease due to a breach. Usually a commercial lease will stipulate when a fundamental or essential breach will have occurred.
Repudiation has been considered to occur when the tenant has committed a serious or sustained breach of the lease.
Requirement to Give Notice
Both these situations require the lessors to give the tenant written notice. If a lessor wishes to terminate the commercial lease because the tenant has breached the agreement, the lessor must give the tenant written notice. Under section 129 of the Conveyancing Act, the written notice must state clearly the particulars of the breach and must require that the tenant remedy the breach or provide compensation to the lessor within a reasonable amount of time.
The Conveyancing Act provides an exemption from the requirement of a written notice where the breach is due to non-payment of rent. Many leases, however, may still require the lessor provide written notice to the tenant, so you should check the procedure set out under your commercial lease.
When specifying the action that the tenant must take to remedy the breach, you cannot ask the tenant to do more than what they would normally be required. For example, in Guillemarde v. Silverthorne, the tenant was given notice to carry out works that included repair items that the tenant was not obliged to complete, and the notice was not upheld. Even if the tenant could have ignored some of the repair tasks that the lessor demanded, the fact that the notice required the tenant to complete ‘all’ the tasks meant that the whole notice was invalid. The nature of the breach dictates that type of remedy that may be requested by the lessor, with some breaches not ‘capable of remedy’.
Tips for Lessors Whose Tenants Have Breached the Lease
Establish the nature of the breach
Not all breaches give rise to the right to terminate, so you should be familiar with your commercial lease to understand whether the breach in issue allows you to terminate. Similarly, work out what remedy is appropriate for the type of breach, and what the tenant is required to do.
Do not try to take back the premises without following the process
Lessors often find themselves in hot water when they try to carry out an eviction by entering the premises and forcing the tenant out. Under a commercial lease, the tenant is in lawful possession of the premises and a lessor’s uninvited presence is considered trespassing. If the eviction is unlawful (because the lessor hasn’t followed the process), and the lessor interferes with the tenant’s use of the premises and their belongings, the lessor could be charged with trespassing or assault. Furthermore, the lessor’s interference with the tenant’s right to quiet enjoyment under the lease could be considered a breach of the agreement.
Follow the appropriate steps and issue a notice
Once you have determined your position and right, issue a notice to the tenant notifying them of the breach and the action required. Provide a reasonable timeframe in which they can remedy the breach, and let them know what will happen if they do not comply. Using your commercial lease as a guide, choose the appropriate response for you to take and when re-entry is necessary.
If you require assistance removing a tenant who has breached your agreement or have any questions about your commercial lease, get in touch with our commercial leasing lawyers on 1300 544 755.