How to cancel a lease when your commercial tenant stops paying rent

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This article is about what you should and shouldn’t do when enforcing your commercial lease against a tenant that has defaulted on their rent payments or another condition of the lease.

Do not:

Do not take matters into your own hands. Do not physically remove the tenant or the tenant’s property or change the locks.

Do:

The best thing to do is to see a commercial lawyer. Take with you a copy of all the documents you have that relate to your lease together with details of the rent arrears.

Process to enforce your lease

The general process for enforcing an Auckland District Law Society standard form of lease follows.

Your lawyer will prepare and serve a notice on the tenant and any guarantors. The Notice will set out the rent arrears and any penalty interest; demand that the outstanding money is paid by a certain date; and state that the lease will be cancelled if the money is not paid by that date.

If the tenant does not pay the amount demanded in the notice by the specified date you will then have the right to enter the premises and cancel the lease.

You will need to take a Notice of Re-Entry with you when you go to the premises. Although it is not mandatory you may like to change the locks when you re-enter the premises for obvious reasons.

What you will be doing is “re-entering” under the terms of the lease and, in doing so, you will be cancelling the lease. There are some archaic rules that prescribe what you must do in order to have legally “re-entered” the premises. There are also rules on how you can deal with the tenant’s property that is left in the premises.

I will discuss these strict requirements in another blog.

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Comments

  1. Kathy Elliott  August 19, 2011

    Good advice. When you know the procedures and your rights it makes it so much easier to get a satisfactory resolution.