Perform or get out – Default Remedies @mhclawyers Thursday, 05 November 2015

Welcome Michael Doran Partner, Real Estate Mason Hayes & Curran

Speakers and topics

Eimear Collins Partner, Dispute Resolution Topic – Remedies against Defaulting Commercial Tenants Peter Johnston, Senior Associate, Dispute Resolution Topic – The Residential Tenancies Act, 2004 Chaired by Michael Doran Partner, Real Estate

Remedies against Defaulting Commercial Tenants

Eimear Collins Partner, Dispute Resolution Mason Hayes & Curran

Common Breaches

Tenant Breaches

Arrears of Rent

Arrears of other

sums reserved

under lease e.g.

Service charges,

rates and insurance

premium

Breaches of non –

financial covenants

e.g. - user clause

- repair clause

- consent provisions

Breaches of

financial

covenants

Remedies Arrears of Rent/other sums

Obtain Court

Order for

Possession

Re-enter if

provision in Lease

or if breach of

condition in lease

Sue for

arrears only

Petition to wind

up tenant

company

Suing for arrears of rent/other sums

Summary

Proceedings

High Court –

Above €75,000

Circuit Court –

€15,0001 – €75,000

District Court –

Up to €15k-

• Must be able to evidence that sums are due and owing and

outstanding. Any agreements regarding payment of arrears

at end? Post dated cheques? Credit for part payments made?

• Guarantors? Financial standing of tenant?

• Lease still in existence after court order made

• Landlord can keep suing for arrears of rent as rent falls due

Petition to wind up tenant company

• Usually threat to petition to prompt payment

• Expensive

• No priority

• Remain unsecured Creditor

Lease Termination by Court Order – “Rent” Arrears

Issue

Proceedings

seeking Court

Order for

possession

“Rent” must be

outstanding for

one year

minimum

District

Court –

€15,000

rent

Circuit

Court –

R.V. less

than

€253.95

High Court

– R.V. in

excess of

€253.95

Express

provision to

terminate

lease/Breach

of condition in

lease

OR

*(it is common for service charges, insurance premiums to be

reserved as additional “Rent”

Remedies non financial breaches

Order compelling

tenant to perform

Damages and Order

compelling tenant to

perform

Order for possession

if provided for in

lease/breach of

condition in lease

- Breach of user

covenant

- breach of repair

- Breach of keep

open covenant

- Failing to keep

within demised area

- Failing to use

correct entrance

- Failing to obtain

Landlord consent

Consider if

interlocutory

injunction

required

Overview

Peaceable Re-entry

• is a fast, effective & economical way in which to terminate commercial lease

and obtain possession

• No Court order required/”self help” remedy

• Less legal fees

• Less “waiting time”

• However commercial tenants taking steps to try to prevent landlord’s

exercising this option

Current attitude of landlords/receivers

• Substantial increase in number

• Willingness to consider re-entry in complex scenarios – (traditionally

confined to shopping centres)

• Créches

• Hotels

• Hostels

• Licensed premises

• Serviced offices/offices

• Part residential

• Commercial alternative to issuing proceedings for possession

What is peaceable re-entry

• Landlord/agent physically re-enters a commercial premises for the purposes

of terminating the lease

• Service of a notice not sufficient

• Must actually get onto/into the premises – outside premises not sufficient -

MacKnight –v-Xtra-Vision

• Most common way is to gain entry through front entrance and then change

all the locks

Is there a right to re-enter the premises?

• Identify breach

• Check if breach gives a right to re-enter to terminate lease/breach of

condition.

• Does a section 14 notice need to be served – all breaches other than non-

payment of rent

• In writing

• Specify breach

• Specify what required to remedy breach

• Call upon tenant to remedy in reasonable timeframe

• If not remedied landlord will re-enter and determine lease

Procedure

• Verified that you have right to re-enter?

• Suitable premises – residential aspects, perishable goods, environmental

issues, licenced premises?

• Element of surprise - Usually a late night/early morning procedure to try to

ensure no one in the premises!

• Peaceable If have a key to premises use it!

If not - cause minimal damage in gaining entry – bore

through the barrel of lock

If there is resistance, do not proceed

• Secure premises once entry gained

• Letter to former tenant notifying it of re-entry/lease termination

Procedure

• Consider 24 hour security post re-entry for period of time

• Insurance/Bailee of goods

LANDLORD TENANT SUB TENANT

(OF TENANT)

GUARANTOR

(OF TENANT)

MORTGAGEE

(OF TENANT)

Tenancy ends

once landlord

peaceably

re-enters the

premises.

Tenant’s interest

ceases once

premises is re-

entered by

landlord –

tenant still liable

for breaches

pre-termination.

Subtenant’s

interest ceases.

Guarantor’s

liability re: future

rent and

covenants in

lease ceases

unless express

provision of

lease states

otherwise.

Mortgagee’s

interest ceases

as the asset no

longer exists.

Legal Effect of Termination

What can a tenant do?

• Relief from forfeiture / injunction – even if all procedures have been properly

followed

• Damages

• Deal

Summary

• Landlord has effective remedies

• May compel performance

• Breach may be grounds upon which to terminate

• If terminating consider whether Court Order or “self help” re-entry

Why Peaceably Re-enter?

• is a fast, effective & economical way in which to terminate

a commercial lease and obtain possession

• No Court order required/”self help” remedy

• Less legal fees

• Less “waiting time”

The Residential Tenancies Act, 2004

Peter Johnston Senior Associate, Dispute Resolution Mason Hayes & Curran

Laffoy J in Canty v PRTB [2007] IEHC 243

“"an extremely complex

piece of legislation”

"very technical and

confusing".

• Pay Rent

• Reasonable access to inspect the dwelling

• Reasonable access to repair the dwelling

• Notify Landlord of any defect in the dwelling

• Not to engage in antisocial behaviour

23

Tenant’s Obligations

• If there is a written lease - what are its terms?

• Market Rent

• Once a year & not in the first 12 months

• Substantial change exception

• Procedure: a) Notice

b) Notify PRTB

c) Dispute / Proofs

24

Rent & Rent Reviews

Part IV Tenancy

25

• 6 months continuous occupation

• No notice of termination served

• Entitled to a further 3 ½ year tenancy

• Can only be terminated on 6 express grounds

• The terms of the 6 month occupation will apply, unless

varied by agreement

• Fixed Term Tenancies?

1. Tenant has failed to comply with the obligations (must allow a

cure period)

2. Landlord intends to sell the dwelling within the next 3 months

3. Dwelling is no longer suited to the needs of the occupying

household

4. Landlord requires the dwelling for own or family member

occupation

5. vacant possession is required for substantial refurbishment of

the dwelling

6. the landlord intends to change the use of the dwelling.

26

Termination of Part IV Tenancy

Non Payment of Rent

14 day notice

advising of

arrears of rent

14 day notice

warning LL

may terminate

Termination notice

28 day notice to

vacate

• Refer dispute to PRTB:

- arrears cannot exceed €20,000; or

- twice the annual rent to a max of €60,000

- if the arrears exceeds these amounts – Court

• What it the tenant doesn’t leave?

28

Non Payment of Rent

Termination of Part IV Tenancies - Notice Period

Duration of Tenancy Notice by Landlord Notice by Tenant

Less than 6 mths 28 days 28 days

6 mths – 1 yr 35 days 35 days

1 yr - 2 yr 42 days 42 days

2 yr – 3 yr 56 days 56 days

3 yr – 4 yr 84 days 56 days

4 yr + 112 days 56 days

Contents of Landlord’s notice of termination

• be in writing

• signed by Landlord or its authorised agent

• specify the date of service of it.

• state the reason for termination if the duration of the tenancy is for a

period of more than 6 months

• specify the termination date- date tenancy will terminate and the

date tenant must vacate the dwelling

• state that the tenant has the whole 24 hours of the termination date

to vacate the dwelling

• state that any issue as to the validity of the notice of termination or

the right of the landlord to serve it must be referred to the PRTB

under Part 6 within 28 days from the of receipt of it.

31

Termination of Fixed Term Tenancies

• Mutual agreement?

• Is the tenant in default of statutory or lease provisions?

• If there is no default or break option, there is no entitlement to

terminate during the fixed term

• Notice of termination:-

- in writing

- signed by the landlord / landlord’s agent

- date of termination

- 24 hours to vacate on the termination date

- date of service

Dispute Resolution

32

Tenancy

Tribunal

Adjudication

Mediation

• Determination Orders / Binding

• Reliefs

• Enforcement

Take Aways

1. No right of re-entry

2. Notice periods

3. Contents of Notice

Q&A

Contact Details

Eimear Collins Partner Mason Hayes & Curran t: +353 1 614 5251 e: ecollins@mhc.ie

Contact Details

Peter Johnston Senior Associate Mason Hayes & Curran t: +353 1 614 5282 e: pjohnston@mhc.ie

Contact Details

Michael Doran Partner Mason Hayes & Curran t: +353 1 614 2344 e: mdoran@mhc.ie

Thank you For any queries on upcoming events, please contact events@mhc.ie @mhclawyers