Section 124 of the Property Law Act 1974 (Qld)
(PLA) provides protection for tenants before a
landlord is able to take the significant step of terminating a
lease pursuant to a right of re-entry or forfeiture under any
provision in the lease.
However, as Special Counsel Anthony Pitt and
Solicitor Greta Carew-Johns discuss in the following article,
a recent District Court of Queensland decision demonstrates that
this is not always necessarily the case.
On 14 April 2011, the plaintiffs (tenant)
entered into a lease with the defendants
(landlord) for an initial period of ten years for
premises to be used as a car wash business. However, within 6
months, the business began to experience financial difficulties and
thereafter fell behind on the payment of rent and outgoings under
A Notice to Remedy Breach of Covenant pursuant to s124 of the
PLA (First Notice) was sent to the tenant on 8
August 2012 in respect of rent and outgoings owing at that time.
The parties disputed whether those breaches were rectified in
full or not, but the business continued to struggle with the result
that the tenant was significantly behind in rent and outgoings by
the following year. During this time, there had been
persistent requests by the tenant to the landlord to reduce the
rent payable because of the tenant's inability to pay.
This resulted in a further Notice to Remedy Breach of Covenant
pursuant to s124 of the PLA (Second Notice) being
sent to the tenant on 4 June 2013.
On 19 June 2013, the tenant's solicitor sent a letter to the
landlord who made it clear that unless the landlord urgently
reduced the rent, the tenant could not continue trading and would
have to declare bankruptcy.
On 25 June 2013, the landlord re-entered and took possession of
There were a range of matters in dispute between the parties
relevant to the above facts. One of these, which was
considered at length in the judgment, was whether the Second Notice
was: prepared by the landlord; properly served on the tenant;
and received by the tenant before the landlord terminated the lease
and re-entered the premises. This was because the
tenant claimed not to have received it.
However, the Court found that any deficiencies with respect to
the Second Notice did not matter because the tenant's
solicitor's letter of 19 June 2013, together with the
tenant's continued arrears of rent and outgoings and persistent
requests to reduce the rent payable, clearly evinced the
tenant's intention to no longer be bound by the terms of the
lease. The landlord treated this conduct (and the court
agreed) as a repudiation of the lease by the tenant.
The Court confirmed that the Second Notice was not required to
be given in circumstances where the landlord elected to accept the
tenant's repudiation of the lease as per its common law right
to do so, prior to the landlord terminating the lease and
re-entering the premises.
Importantly, the Court discussed that the tenant's conduct
must be repudiatory and that a breach of a term (even an essential
term) alone may not necessarily evince an unwillingness or
inability to be bound by the terms of the lease. The relevant
conduct of the tenant in each case must be examined in order to
determine whether it was in fact repudiatory.
The tenant argued that the letter of 19 June 2013 was not
repudiatory at all, and was only sent as a "bargaining
tool", "to let them know we were serious because
a solicitor had written the letter" and "because
they knew we had been struggling". However, this
submission was rejected as the Court considered that the letter
clearly indicated that, unless a rent reduction was given, the
tenant would not, and could not, meet those obligations any
longer. The tenant also argued that s124 of the PLA must be
complied with before a lease is terminated on any basis – but
the Court decided that this argument was against the weight of case
authority that said otherwise.
The tenant was therefore ordered to pay the landlord $118,469.55
in damages for loss of rent and outgoings plus interest.
The decision serves as a timely reminder for landlords and
tenants of the possibility of termination of a lease even where a
notice under s124 of the PLA has not been served; as well as the
care required to be taken in drafting correspondence to ensure that
it cannot be taken on its own, or in conjunction with other
conduct, as repudiatory.
Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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