It can be frustrating and costly for a commercial landlord
trying to deal with a tenant who isn't paying rent. One option
is to serve a notice of intention to cancel the lease. Sending the
tenant a notice of intention to cancel the lease will make it clear
that the tenant needs to pay up or risk having their lease
Cancelling a lease is likely to have a large impact on the
tenant's business and if the notice is not correct then the
tenant has rights to seek recovery for damages. It is important
that the notice contains the correct content and is served
properly. Preparation and service of the notice should be handled
by an experienced lawyer to avoid issues. The process for providing
a notice is set out under the Property Law Act 2007 and in the
Auckland District Law Society Deed of Lease. A notice can be served
as soon as the tenant is in default but it must provide the tenant
a minimum of ten workings days from the date of service to make
payment of rental arrears.
A landlord should be prepared to terminate the lease if the
tenant does not comply with the notice and this will usually mean
finding a replacement tenant. Fortunately a landlord does not have
to immediately cancel the lease after the ten working day notice
period. A landlord can cancel the lease and re-enter the premises
at any time after the notice period has expired, provided the
amount claimed in the notice has not been paid. This allows a
landlord time to find a replacement tenant.
The purpose of the notice is to allow the ability to validly
cancel a lease and all costs are normally payable by the tenant
even if the lease isn't cancelled. If the landlord does validly
cancel the lease then the tenant remains responsible for any rental
arrears and also the costs involved with reinstating the premises
as part of their lease end obligations.
A Landlord still may encounter issues around re-entry of the
premises and recovering payment from the tenant and these issues
should be considered. However, more often than not, it is better to
have the tenant replaced even if the landlord's costs and
rental cannot be recovered
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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