Evicting a Commercial Tenant

The Property Law Act 2007 (“the PLA”) sets out a process that must be followed before a commercial tenant can be evicted, and the lease terminated. The PLA process, even in cases where the tenant appears to have abandoned the premises, can be a minefield for the unsuspecting. Whether you are a landlord or a tenant, it is important that you understand your rights and obligations under the PLA.

The most common reason for the termination of a lease is a tenant’s ongoing failure to pay rent and outgoings. This is more pronounced in times of economic downturn, but a business can struggle or fail at any time.

Termination may also occur where a tenant unreasonably breaches other obligations under a lease, for example, by failing to maintain or repair the premises to an agreed standard.

Termination of a lease for a one-off failure to pay rent or outgoings may not be the best option for a landlord. Where a landlord wishes to evict the tenant and re-gain control of the premises by changing the locks, the tenant’s obligation to pay rent comes to an end. In some circumstances, an alternate strategy would better serve the landlord’s interests.

Where a landlord wants to evict a tenant and bring the lease to an end, the PLA requires that notice first be served on the tenant. The notice must set out essential details (including the nature of the breach, the remedy required and the tenant’s rights), and must be properly served. Failure to comply with the PLA rules can render the notice invalid, which can have drastic consequences.

The notice must expire before the landlord attempts to re-enter the premises. Where the rent is in arrears, termination cannot occur within ten working days after the service of the notice. The period for non-rent breaches may be longer depending on the nature of the breach. For example, where repairs need to be completed by the tenant, a reasonable period must be given to allow the tenant to effect the repairs.

A landlord who acts on an invalid notice can suffer harsh penalties. The PLA provides protection to the tenant’s business and in particular allows a tenant to apply to the Court for relief against the termination of a lease. The Court may award damages (which can be significant) against a landlord who unlawfully interferes with a tenant’s business.

The message is simple: whether you are a landlord or a tenant, obtaining legal advice before acting will ensure you get the procedure right.

We regularly assist in lease disputes, and would be happy to help you. You can contact us on +649-969-0126.
This Article is intended as general information and not specific legal advice. If you want legal advice about a problem, please contact the author: Sam Houliston, Associate Solicitor, Wynyard Wood (Highbrook), direct dial +649-969-6640 or email sam@wynyardwood.co.nz