Recently, the validity of a Form 7 Notice to Remedy Breach of Covenant issued pursuant to Section 124 of the Property Law Act 1974 (Qld) was tested in the Queensland Supreme Court decision of Tyrell & Anor v Jescro Enterprise Pty Ltd [2017] QSC 55. The decision brought to light the need to take care in the preparation of a Form 7 to ensure that the approved form is strictly complied with in order for the Notice to be valid and effective.
In that case, the Applicants (landlord) sought a declaration to confirm that their Lease with the Respondent (tenant) had been validly terminated following the tenant’s non-compliance with a Form 7 Notice to Remedy Breach that had been issued to the tenant.
After the case had been argued, the landlord’s barrister brought to the Court’s attention that the Notice in question did not include the “Note” which appears in the approved version of the form. In this regard, the approved Form 7 contains the following as part of the form:
- “[Note: The lessor will be entitled to re-enter or forfeit the lease in the event of the lessee failing to comply with this notice within a reasonable time – see section 124 of the Property Law Act 1974.]
- [Additional note: If arrears of rent or other periodic payments are being claimed, it should be made clear the amounts involved and the periods to which they relate; eg base rent: March 1995 - $x..]”
The reasons for Judgment do not reveal whether the “Additional Note” appeared in the Notice or not.
Despite the absence of the “Note” in the Notice, the landlord argued that the Notice was still valid.
Initially, the Court noted that “it has long been accepted that a failure to include the note was fatal to the validity of a notice given under s 124 …”
The landlord argued that the covering letter that served the Notice included the essential information conveyed by the “Note.” However, the Court rejected that argument, stating that it is not possible to rectify a defective notice by such means, because “it is the Notice which must be in strict or substantial compliance with the approved form.”
The landlord also made the same argument about the terms of the Notice itself, and that the “Note” would not have added anything to what was actually included in the Notice. The Court, however, rejected this argument as well and gave four reasons for this as follows:
- The relevant information was not contained in a note at the foot of the form, which highlights the relevant and important information.
- The Court considered there to be a substantial difference between advising that the “lessor will be entitled to re-enter or forfeit the lease” (as stated in the “Note” in the approved form) and advising that “you may be liable to forfeiture and termination of the lease” (as was included in the Notice in this case).
- The Notice did not inform the tenant that it is a failure to comply with the notice “within a reasonable time” that is significant.
- The Notice did not draw the tenant’s attention to s 124 of the Property Law Act, which is the section the tenant should look at for their obligations. The reference to that section at the heading of the Notice conveys a different message and merely suggests that the Notice is given under that section.
Accordingly, the Notice was found to be invalid and the landlord’s proceeding was dismissed.
Landlords must therefore take care in the preparation of a Form 7 Notice to Remedy Breach of Covenant, and ensure that the approved form is strictly complied with in order for the Notice to be valid and effective. Landlords should have such notices prepared and served by experienced lawyers to avoid these types of problems arising.
For more information or discussion, please contact HopgoodGanim’s Commercial Property Team.