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Relief Against Forfeiture of Lease

The recent case of Dee Vine Group Pty Ltd v Palais Reception Centre Pty Ltd [2019] NSWSC 1462 has helpfully outlined the factors and general principles a Court will consider in assessing whether or not to grant relief against forfeiture of a Lease in favour of a tenant.  Kunc J outlined the following general principles:

  1. The granting of relief against forfeiture is not “as of right” but requires the Court to exercise its discretion in favour of the Lessee.
  2. A successful applicant must satisfy the usual equitable maxims of “he who seeks equity must do equity” and the applicant must “come with clean hands“.
  3. Where the only event of default is failure to pay rent, the Court will ordinarily grant relief against forfeiture upon payment of rent, costs and interests and there is no reason to believe that the tenant will not meet his or her future obligations to pay rent.
  4. Once a Lessor has all that the right of re-entry was bargained for (i.e. security of payment of rent), it would require a special or exceptional circumstances for the Court to decline relief in favour of a Lessee.  It has been described as a heavy burden on the Lessor as to why equitable relief should not be granted. 
  5. A Lessor may point to non-monetary breaches of covenants the subject of a Notice under Section 129 of the Conveyancing Act which have not been remedied and which would otherwise warrant termination of the Lease in support of relief being declined.
  6. Whether the Lessee has demonstrated a willingness to honour its obligations under the Lease and where the Lessee’s future compliance with the Lease appears unlikely will be of significance.
  7. Whether the Lessee’s conduct was wilful and did not arise from ignorance or inadvertence.  If this is the case, relief will only be granted in exceptional cases.
  8. Whether or not the Lessor caused or contributed to the breach.
  9. Whether or not the forfeiture will result in some windfall or other disproportionate outcome in favour of the Lessor.
  10. The gravity of the breach, the damage to the Lessor and the loss to the Lessee.

It is clear from the above that provided a Lessee rectifies its breaches, it is likely that a Court will grant relief against forfeiture to reinstate a Lease.

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