Section 146 Notices: Clarity is king

The Issue

How directive does a Section 146 Notice need to be in order to be valid?

What Happened?

In a complex case involving managed investment schemes and plantation forest, one part of the case revolved around a Tenant who had been served with a Section 146 Notice by a Landlord who subsequently took possession pursuant to the notice and sold the Premises. Despite not taking action when the Section 146 Notice was issued, the Tenant later argued for relief against forfeiture on grounds including that the Section 146 Notice lacked clarity to enable to the Tenant to rectify the breach. In particular, the notice did not specify an exact amount of compensation sought by the Landlord.

The Court held that a Section 146 Notice should address the following:

1. Beyond stating a breach, the notice should contain the particulars of the Tenant's actual acts or omissions that constitute the breach.
2. The actions that the Landlord wants from the Tenant and, upon completion, the Landlord will no longer seek to terminate the Lease.
3. These actions should be stated clearly so that the Tenant does not need to speculate on what the Landlord requires. The degree of precision will depend upon the nature of the breach, the Tenant's knowledge and the compensation open to the Landlord.
4. The Landlord is entitled to give the Tenant multiple options to rectify the breach in the Notice. However, the choice of option to be taken to remedy the default is at the discretion of the Tenant.

The Landlord does not need to dictate with absolute precision what the Tenant needs to do to rectify the breach, but the Tenant should not be left guessing as to what it needs to do. Where the Landlord seeks compensation, the Court found that is sufficient for the Section 146 Notice to specify reasonable compensation, together with proposal as to how this would be later calculated. In this case therefore, the Section 146 Notice was valid.

Practical Tip

When a Tenant is in default, Landlords should think carefully about what it is they need the Tenant to do or pay and to properly communicate this in the Section 146 Notice. If the loss to be compensated cannot be specified, then a method for how it will be determined should be included. A failure to be clear can result in the Section 146 Notice being invalid and put Landlords at risk of liability to Tenants.

How Sharrock Pitman Legal can assist?

Landlords considering issuing a Section 146 Notice should seek professional advice before taking action. Contact our Accredited Specialist Property Law team for assistance on 1300 205 506 or email property@sharrockpitmanlegal.com.au.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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