The Covid-19 Response – How it affects the timeframes to remedy defaults under a mortgage or commercial lease

Changes to the Property Law Act for Landlords and Mortgagees

On 15 April 2020, the Government announced changes to the powers under the Property Law Act 2007 (PLA) in respect of Landlords’ rights to terminate commercial leases and the powers for Mortgagees to take possession or sell mortgaged land. On 16 May 2020, the COVID-19 Response (Further Management Measures) Legislation Act 2020 came into effect.

Changes to the Termination of a Commercial lease

The usual provisions of the PLA allow a Landlord to exercise their right to cancel a lease if:

• the rent has been in arrears for at least ten working days;
• a compliant notice of intention to cancel the lease is given which advises the lessee of the time they have remedy that default (being a minimum of ten working days); and
• the default is not remedied within the specified timeframe.

The (minimum) ten working days that the rent must be in arrears and the time to remedy the default can run concurrently.

The amendment to the PLA extends both the timeframe for which the rent must have been in arrears and the time to remedy the default provided by the notice of intention to cancel the lease from ten working days to 30 working days.   Those timeframes can still run concurrently.

Mortgagees’ Rights

The current provisions of the PLA allow a Mortgagee to exercise their powers to take possession or sell the land if:

• the terms of the mortgage are breached (including the failure to pay the amounts due when they fall due);
• a compliant notice is given; and
• the default is not remedied within the specified timeframe.

The amendments to the PLA extends the minimum time to remedy the default from 20 working days to 40 working days.  This change will apply to both residential and commercial property.

Timeframes

These changes will be in effect for six months after the Epidemic Preparedness (COVID-19) Notice 2020 comes to an end.  The Epidemic Preparedness (COVID-19) Notice 2020 was renewed every three months from March 2020 until its final expiry on 20 October 2022.  Accordingly, the extended timeframes remained in effect until 20 April 2023.

If you need any advice on issuing notices under the PLA or if you are served with a notice, please contact Sarah Rawcliffe for advice.

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.