MAKE YOUR FREE Notice of Breach of Covenants

This Section 146 Notice template covers:

• details of the tenant’s breach

• the formal requirements that must be met for the Notice of Breach of Covenants to be valid

• a request for compensation

Use this Notice of Breach of Covenants if you become aware that your commercial tenant is breaching a covenant of their Commercial lease. If the lease is for a fixed term and the commercial tenant is not in rent arrears, issuing a Notice of Breach of Covenants is the simplest way to take formal legal action with a view to forfeiting (ie ending) the lease.

A Notice of Breach of Covenants provides details of the breach, informs the tenant how to rectify the breach and outlines any potential compensation due to the landlord.

For more information, read Dealing with breaches of covenant and How to terminate commercial leases.

In essence, a covenant is a rule contained in a Commercial lease that sets out the obligations of a tenant (or leaseholder) under the lease. Covenants can be restrictive (ie they can prohibit certain things, like allowing animals inside the property or installing hardwood flooring) or positive (ie they can require certain steps to be taken, like cleaning windows every six months or replacing blown light bulbs). For more information, read Restrictive covenants for property.

The most common type of covenant breach is non-payment of rent. However, the non-payment of rent does not require a Notice of Breach of Covenants. For the purposes of a Notice of Breach of Covenants, covenant breaches often involve:

• tenants making changes and alterations to the property without the landlord’s consent

• tenants removing carpets and installing hardwood flooring

• the non-payment of service charges (if these are separate from the rent)

• noise complaints

• allowing animals on the property (this is, however, more common in residential tenancies)

• issues related to parking spaces

• leaks or damage to the property caused by the tenant’s negligence

• repairing obligations (although these usually relate to the landlord)

• sub-letting parts or all of the property without the landlord’s consent

A Notice of Breach of Covenants should give a tenant a reasonable period of time to rectify (ie fix) the breach. What is considered 'reasonable' will vary depending on the specifics of the situation. For example, more time will need to be given to a tenant to repair significant damage than to remove their vehicle from another tenant's parking space.

For more information, read Dealing with breaches of covenant.

Initially, commercial tenants are expected to rectify any breaches of their covenants without being told or after being asked informally. If they fail to take adequate remedial action, you can serve them a Notice of Breach of Covenants formally requesting that the breaches be fixed. If, after receiving a Notice of Breach of Covenants the breaches are not rectified (either within a reasonable timeframe or by the date set out in the Notice), the tenant’s lease is deemed to be forfeited. This means that you retake possession of the property. For more information on forfeiture, read How to terminate commercial leases.

A Notice of Breach of Covenants cannot be used where the commercial tenant has failed to pay the rent. However, this does not mean that you cannot regain possession of the commercial property. In situations involving rent arrears, a Notice of Breach of Covenants is not needed to forfeit the lease. For more information on forfeiture for non-payment of rent, read How to terminate commercial leases. For more information on how to recover unpaid rent, read Commercial Rent Arrears Recovery (CRAR).

Once the Notice of Breach of Covenants has been served, you should ensure that your commercial tenant has:

• received the Notice and understood how the covenant has been breached, and 

• been provided with a reasonable amount of time for the breach to be remedied

You may also be able to request compensation as part of the Notice of Breach of Covenants. If the tenant fails to put right the breach, you can take steps towards forfeiting the lease, repossessing the property and claiming compensation. Read How to terminate commercial leases for more information and Ask a lawyer if you have any questions or require assistance.