Tuesday, 8 November 2011

How does a tenant obtain relief against forfeiture of its lease? (Part 2)

In another example of the difficulties faced by landlords in opposing an application for relief against forfeiture, I recently appeared for a landlord of retail premises in the following circumstances:

The tenant had defaulted in paying the rent consistently over nearly 2 years;

At times, the tenant fell up to 6 months behind in rent;
The landlord had (very generously) served notices to pay the outstanding rent on at least 3 occasions (in addition to providing monthly reminder letters and e-mails about the outstanding rent);
Two of those notices expired and the landlord took possession of the premises;
After the first re-entry, the landlord allowed the tenant back into possession;
Finally, the landlord had enough and refused to allow the tenant back into the premises after the second re-entry;
After taking possession, the landlord negotiated a sale of the premises, with vacant possession;
Before a contract for the sale was executed, the tenant purported to pay the arrears of rent, and applied to VCAT for relief against forfeiture;
At the time of the first hearing before VCAT, the tenant had not paid the current month's rental.

Despite the damning record of rental payments, Deputy President McNamara of VCAT alluded to the fact that relief against forfeiture will almost always be granted to a tenant, if the tenant can satisfy the tribunal that it has taken steps to ensure that no further defaults will occur. 

In this case, the tenant offered a further security bond of 4 months' rental, having obtained a loan to provide the business with working capital, which was enough to satisfy the tribunal that it would take its obligations under the lease more seriously.

W G Stark

Hayden Starke Chambers

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