What happens in a Commercial Lease Termination?

Do you need to terminate a commercial lease?

What amounts to a breach of lease is always dependent on the circumstances of the lease and the terms of the lease.

Where a commercial tenant under a lease believes that they should not have their lease terminated they have the ability to apply to the Queensland courts for an order of “relief against forfeiture”.  Essentially this is an order of the court whereby the court says that the tenant is not in breach of the lease or that the breach is not sufficient to entitle the landlord to forfeit the lease. The result of this type of order is that the landlord will not be able to terminate the lease and remove the tenant pursuant to the terms of the lease.

There are a wide variety of decisions in which the Courts have decided that a breach of the lease did not sufficiently amount to grounds that the landlord could retake possession. The Courts have wide discretion and take many factors into account before allowing such an order.

Importantly, a commercial tenant cannot claim relief against forfeiture before the landlord has commenced proceedings for possession or has taken possession. Where a notice of default under the lease has been served the tenant may apply for an injunction to prevent the landlord from retaking possession under a lease.

What factors are involved in Commercial Lease Termination?

The courts will consider a number of factors before determining whether or not a tenant should be granted relief against forfeiture, some of these factors include:

1.            whether the tenant has been guilty of a serious disregard of the landlord’s rights over a period of time under the terms of the lease.

2.            whether the default has been corrected, usually this is enough for a court to grant relief against forfeiture.

3.            the seriousness of the breach of lease (i.e. whether it was trivial or substantive in nature).

4.            the benefit received by the landlord resulting from the termination particularly for example if this benefit is derived as a result of the tenants improvements.

5.            the damage to the landlord as a result of the breach and what further damage would be incurred should the lease not be terminated.

6.            the future workability of the relationship of landlord and tenant.

7.            the likelihood of future breaches of the terms of the lease.

8.            the relative loss to the lessee if the relief is not granted in relation to their business and trying to find new premises if they wish to do so.

9.            any harm that may be done to third parties as a result of the forfeiture.

10.          the landlord’s motivation

When to get help.

Our lawyers have extensive experience in acting for both landlords in assessing relief against forfeiture claims or advising tenant clients in relation to their rights in relation to relief against forfeiture. No one factor is more important than another and the courts will look at the factors to determine what if any relief against forfeiture should be granted. It is a complicated area of the law and requires a detailed consideration of the terms of the lease and the circumstances of the default.

At SMS Law, our team of solicitors have extensive legal experience. We know the legal system can feel overwhelming, and it is hard to feel confident when you don’t know how to move forward. That’s where we step in, to guide you through each step of the legal process.

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