WHILE THIS MAY have be written from a Tenant’s perspective … the message is equally valuable for Landlords, owning Commercial investment property.
Many landlords, tenants (and legal practitioners for that matter!) do not appreciate the significance of a default clause in a commercial lease that deals with the non-payment of rent.
The Default Clause
In most jurisdictions across Australia, if a tenant is in default and the landlord wishes to exercise a right of re-entry — the landlord must first serve a notice to you specifying the breach and providing a reasonable opportunity to remedy the default.
If the tenant fails to remedy the default within the required period, the landlord may exercise their right of re-entry.
However, the landlord is not required to issue such a notice for non-payment of rent.
What Does This Mean For You?
Almost all commercial leases will contain a default clause. That clause usually states that the tenant’s failure to pay rent (or failure to pay within a certain period of time after the due date for payment) will constitute a default.
A clause of this nature entitles a landlord to exercise a right of re-entry without having to serve a default notice on the tenant.
Clearly, this would be disastrous for a tenant — especially if your non-payment was due an administrative oversight.
BOTTOM LINE: Tenants should ensure that their commercial leases require the landlord to serve a default notice and allow you a reasonable period of time to remedy a default before exercising a right of re-entry.
The consequences of not having a clause to this effect could be dire for you and your business.
Disclaimer: If you think a similar situation may apply to you, then you should contact us for detailed legal advice relating to the particular facts and circumstances of your property or lease agreement. This article is not intended to provide such detailed and specific advice and you should not act on the basis of any matter contained in this article without first obtaining more comprehensive professional advice.