When a tenant breaches a lease, a landlord may be entitled to terminate the lease and recover possession of the property. This process is known as forfeiture.
However, termination is not always final. In certain circumstances, a tenant may apply to the court for relief against forfeiture, which can result in the lease being reinstated. In New South Wales, this area is primarily governed by section 129 of the Conveyancing Act 1919 (NSW) (Conveyancing Act). This article outlines the key principles and practical considerations relevant to relief against forfeiture.
What is required before forfeiture?
Before a landlord can terminate a lease for a breach, they must comply with section 129(1) of the Conveyancing Act. This requires the landlord to:
- give the tenant written notice specifying the breach;
- require the tenant to remedy the breach (if it is capable of remedy); and
- allow a reasonable time for the breach to be remedied.
If the tenant fails to comply within that time, the landlord may proceed to terminate the lease. Failure to strictly comply with these requirements can make the forfeiture invalid.
What is relief against forfeiture?
Relief against forfeiture is an equitable remedy that allows a court to set aside a termination and reinstate the lease, typically on the condition that the tenant remedies the breach. It is commonly sought in circumstances where:
- rent is in arrears; or
- the tenant has breached another obligation under the lease (for example, failing to maintain the premises).
The remedy reflects the principle that forfeiture operates as security for performance of the lease, rather than as a punitive measure or a means of giving the landlord an unearned benefit. The court has a broad discretion and will determine each case on its merits.
When will relief be granted?
While each case is determined by its facts, several key factors guide the court’s discretion.
- Nature of the breach
Relief is most commonly granted in cases of non-payment of rent, particularly where arrears are paid promptly.
In Sneakerboy Retail Pty Ltd v Georges Properties Pty Ltd [2020] NSWSC 996, the Supreme Court reaffirmed that forfeiture for non-payment is not punitive and that relief will generally be granted where the landlord can be restored to its original financial position.
By contrast, more serious breaches, such as deliberate damage or persistent non-compliance, are less likely to attract relief.
- Whether the breach can be remedied
A tenant must be able to ‘make good’ the breach.
This may involve:
- paying outstanding rent in full;
- carrying out required repairs; or
- otherwise complying with the lease.
Where the breach is capable of remedy and genuine steps are taken, relief is more likely.
- The tenant’s conduct
The court will closely examine the tenant’s conduct. Relief is less likely where the breach is:
- intentional; or
- part of a pattern of repeated non-compliance.
That said, imperfect past compliance will not necessarily defeat a claim if the tenant is now acting reasonably and in good faith.
- The tenant’s ability to meet future obligations
Relief is forward-looking. A tenant must demonstrate not only that past breaches have been remedied, but also that they can comply with the lease going forward.
In 711 Hogben Pty Ltd v Tadros [2022] NSWSC 1653, the Court confirmed that relief will rarely be refused where the landlord can be restored to its position, unless there is a real concern that the tenant cannot meet future obligations, particularly the payment of rent.
- Impact on the landlord
The court will also consider whether granting relief would unfairly prejudice the landlord.
Relief may be refused where:
- the landlord has already entered into a new lease; or
- the landlord has suffered loss that cannot be adequately compensated.
Practical considerations for landlords
- Follow the forfeiture process strictly
Failure to comply with section 129(1) of the Conveyancing Act can make a forfeiture invalid. Landlords should ensure all procedural steps are followed before terminating a lease. Where possible, landlords should also engage with tenants to resolve breaches before taking enforcement action. Forfeiture should generally be a last resort.
- Be aware that tenants may try and claim for relief from forfeiture
Landlords should be aware that termination does not necessarily bring matters to an end. Tenants may apply for relief, particularly where breaches can be remedied. A failure to act reasonably or to engage with the tenant prior to termination may increase the likelihood of relief being granted.
Practical considerations for tenants
- Communicate consistently throughout the tenancy
Early and transparent communication can often prevent disputes from escalating to forfeiture. If rent will be late or an issue arises, tenants should notify the landlord promptly and provide a clear plan to remedy the breach. This may also assist in any subsequent application for relief.
- Act quickly
If a lease has been terminated, any application for relief should be made without delay. Delay can weigh heavily against a tenant, particularly if the landlord has taken steps to re-let the premises.
If you have a lease dispute or need advice on a forfeiture matter, please contact Laura Bazouni at Coleman Greig Lawyers.
