Prove to be very beneficial
It is now quite clear since the case of Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 that:
- The ordinary principals of contract including that of termination for repudiation or fundamental breach applies to leases;
- The presence of an express proviso for the entry in a lease does not exclude other common law rights available to the lessor for termination or damages.
A contract may be determined for any breach of a fundamental or essential term. A lease (as well as granting an estate in land) is a contract. A breach of an essential term may also constitute a repudiation of the lease, also entitling termination. The recent CMA case again illustrated the importance of specifying essential or fundamental terms of the lease.
In the CMA case, the lease specifically stated that the tenant had an obligation to:
- Keep the premises in good repair and condition; and
- Promptly repair any damage to the premises for which it was responsible, and
- and that the tenant's obligations with respect to repair were essential terms of the lease.
The tenant was in breach of the obligations to repair.
The Tasmanian Conveyancing and Law Property Act (Act) has a provision similar to our Property Law Act section 124 (1) providing that "a right of entry or forfeiture under any provision or stipulation in a lease, for a breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the breach complained of...requiring the lessee to remedy the breach...and the lessee fails, within a reasonable time thereafter, to remedy the breach...
In the CMA case the landlord sent a letter to the tenant (not a specific notice under the Act but saying it was a notice) requiring the tenant to remedy the breach within a reasonable time and pointing out that the breach was a breach of an essential term of the lease and advising that if the tenant failed to comply, the landlord would at its election either forfeit the lease or accept the tenant's repudiation of the lease.
After 18 days after the date of the letter, the landlord re-entered the premises and locked the tenant out. It affixed a notice to the premises stating that the landlord had accepted the tenant's repudiation by failing to comply and terminated the lease.
The tenant commenced proceedings against the landlord seeking a declaration that the landlord re-entry was unlawful and ineffective to terminate the lease. The court held that the landlord had validly terminated the lease and denied the tenant relief against forfeiture.
The court found if the landlord terminates and re-enters under an express term of the lease it must comply with giving a notice to remedy in accordance with the Act (our section 124 (1) of the Property Law Act).
However it found that if the landlord terminates and re-enters pursuant to its common law right it may do so without serving a notice.
The court followed the authority of the
High Court in Progressive Mailing House Pty Ltd v Tabali Pty Ltd.
In summary, in the CMA case the landlord by having specified in the lease the obligation to keep the premises in good repair and to promptly repair was an essential condition was able to validly terminate the lease notwithstanding that the landlord had not given a notice to remedy under the provisions of the Act and notwithstanding that in the particular circumstances the court found that the tenant's actions did not constitute repudiation.
For more information please contact Denis Stephenson on
07 3234 3107 or
email.
