Canceling A Lease 08 Dec 2011

New Zealand's Property Law Act 2007 (the Act) sets out rules for landlords wanting to cancel leases that their tenants have breached.  The landlord must follow a specified process before they can cancel the lease.  The process involves first giving notice and then taking possession of the property.  Parry Field Lawyers provide legal advice on a range of property matters including cancelling a lease.

Giving Notice

Before cancelling a lease for breach, the landlord must give notice to the tenant specifying the tenant's breach, and the landlord's intention to cancel the lease if the breach isn't remedied. The form of notice varies depending on whether the breach is failure to pay rent or some other breach of the lease.

Failure to pay rent
Where the tenant has failed to pay rent, the landlord must give the tenant at least 10 working days notice of the landlord's intention to cancel the lease unless the rent is brought up to date within a specified timeframe. In addition, the landlord can only cancel if the rent is at least 10 working days overdue.  These two 10 working day periods can run at the same time, so the landlord can give notice of intention to cancel the lease as soon as the tenant misses a rent payment.

Other breach
Where the tenant has breached another lease condition, the landlord must give notice of the landlord's intention to cancel the lease unless the breach is remedied.  The notice must give the tenant a reasonable period within which to fix the breach. Alternatively, the landlord can require reasonable compensation in lieu of having the tenant remedying the breach or where a breach is incapable of remedy.

In both cases, the notice must:

The landlord must give notice to each tenant individually as well as to each guarantor. In addition, the landlord must give notice to any mortgagee or receiver, or any sublessee, and to any mortgagee or receiver of the sublessee where these parties are known to the landlord. Failing to give notice to these parties will not invalidate the notice, but it may enable them to ask the Court for extra time to remedy the breach.

Taking Possession
If after receiving a complying notice, the tenant still fails to pay the rental arrears or remedy the breach within the specified period, the landlord can apply to the court for possession of the property.

Alternatively, the landlord can physically re-enter the property and cancel the lease. The re-entry must be peaceable and must not breach section 91 of the Crimes Act 1961.  We recommend you take a conservative approach to what counts as peaceable.  One way to do this, which often works well, is re-entering the premises in the day time but outside business hours when the premises are empty.  If the tenant is present when you try to re-enter and does not voluntarily agree to leave, it is likely to breach section 91 if you persist in trying to take possession.

It is helpful to bring a locksmith with you to change the locks and secure premises.  You could also use a security guard to keep you and the premises secure.  Once in the premises you should take an inventory of the fittings and chattels (tenant's and landlord's), and remove the tenant’s fittings and chattels to a safe and secure place.  Alternatively, you could arrange a suitable time with the tenant for them to come to the premises (while you are there) and remove their fittings and chattels.

Cancellation of a lease is not straightforward.  You should obtain legal advice before cancelling a lease.  Should you need any assistance with this, or with any other Lease matters, please contact Kris Morrison or Tim Rankin at Parry Field (348-8480).