Serving notice in a commercial lease or contract might appear straightforward. However, mistakes are regularly made by the party serving notice, often resulting in cases being brought to Court to determine whether a notice has been validly served. This guide will address some common pitfalls and ways to mitigate the risks; it can be costly for the party seeking to rely on a notice to get it wrong.
For a notice to be valid it must be served strictly in accordance with the lease or contract provisions and comply with statutory requirements. Important rights may be lost if a notice is not validly served such as a break option, an option to extend, a rent review or an option to purchase.
Read the lease or contract carefully to determine exactly what is required by way of service. If a fundamental requirement for service is not complied with, or pre-conditions not satisfied, then the notice will be invalid.
Avoid superfluous language, ensuring the terms are as clear as possible so that your position is beyond doubt. This may seem obvious but if there is any ambiguity the Court, in deciding whether a notice has been validly served, will find against the party seeking to rely on the notice.
Unless the lease states otherwise, 40 days prior notice is required in advance of the contractual end date to bring it to an end, otherwise it will continue year to year on the same terms. A longer notice period of over one year is required for larger properties of over 2 acres; this point is often overlooked.
Extra care must be taken when serving a notice of irritancy for breach of any contractual lease obligations to ensure compliance with the statutory test of what a “fair and reasonable landlord” would do in the same circumstances.
It is still common for important dates to be forgotten. Robust processes should be put in place to identify key dates in sufficient time to ensure they are not missed. This includes regularly reviewing documentation and taking professional advice well in advance.
Finally, act consistently with the notice. For example, demanding or accepting rent after serving a break or irritancy notice might be construed as acting inconsistently.