Forfeiture of Lease
From WikiProperty
Sometimes, (rarely, thankfully), a tenant’s actions are so contrary to the provisions of the lease that the landlord feels there is no option but to end the relationship.
The landlord proceeds to ‘forfeit the lease’ effectively stripping away the rights in the property the tenant previously had through the lease.
Because the process involves removal of property rights, it is carefully controlled by law and, in fact, a landlord cannot (except in the case of non-payment of rent) forfeit a lease without giving the tenant notice of intention to forfeit and a reasonable period of time within which the tenant is allowed to remedy the default if it can be remedied.
The law very jealously guards the property rights of the tenant and the Courts may well find that a landlord has ‘waived’ the right to insist on forfeiture if the landlord does some act after becoming aware of the default, or says something, which suggests that the landlord considers the lease to be continuing. The continued acceptance of rental by the landlord is a classic situation which can lead to the Courts holding that the landlord has waived a right to insist on forfeiture for a particular default.
An interesting question arose in a recent case as to whether the acceptance of rental by a landlord after the landlord had become aware of the default, (in this case the failure to apply fertiliser to a rural leased property by the date required in the lease), but before the period for remedy in the landlord’s notice of intention to forfeit had expired, amounted to a waiver by the landlord of the landlord’s right to insist on forfeiture for this breach.
Many would have thought that the acceptance by the landlord of rental, after the landlord had become aware of the default, would be fatal to the landlord’s right to forfeit the lease. However, the Court of Appeal decided that the right to forfeit does not become complete until the period of notice has expired and the landlord’s acceptance of rent prior to then was not held to have prejudiced the right to forfeit. The rationale for this is that the tenant could have remedied the default (if it had been capable of remedy) prior to the expiry of the period of notice and it would be illogical to say that the landlord could not accept rent on a lease which had at all times been valid and had not in fact come to an end, the default having been remedied within time.
The above is not intended as legal advice. The area of forfeiture of lease is a complicated one with many traps and pitfalls. If any property investors find themselves in this situation they should contact their legal adviser without delay.
For any further information on this or other property investment matters please contact Philip Dreadon at greig.bourke@xtra.co.nz
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