The PLA notice gives the tenant notice, that if the tenant fails to pay the rent within 10 working days (currently 30 working days due to COVID amendments to the PLA), the landlord will be entitled to cancel the lease. Landlords can usually seek any legal costs incurred in the process as well, depending on the covenants in the deed of lease. Often the PLA notice will prompt a payment from a problem tenant.

If the tenant still fails to pay the rent after the notice period has expired, the landlord has two options and will need to think very carefully before exercising the next step, as there are advantages and disadvantages to both options.

Option 1 is to exercise the right to cancel the lease by re-entering the premises peaceably (and without committing forcible entry under section 91 of the Crimes Act 1961). Whilst this is the most immediate and possibly cheaper upfront option, this option is fraught with risk. The main risk is that the tenant might apply to the High Court for relief under section 253 of the PLA and get reinstated in the premises. The Court has a wide discretion to grant relief to a tenant. There are a number of judgments, where the High Court has given a problem tenant relief despite a pattern of failures to pay rent and arrears. This could be costly for a landlord who has removed a tenant and started the process of advertising the premises seeking a new tenant. The other risk to be aware of is, that if the tenant is present and the landlord forcibly enters the premises, the landlord may be committing the crime of forceable entry.

Option 2 is to apply to the Court for an order for possession of the land. This is the safer option but has a greater upfront cost. Fortunately, the landlord can simultaneously seek an ancillary order for rent arrears, penalty interest and costs under section 251 of the PLA. The tenant is still in a position to seek relief from the Court and to have the lease reinstated, however, in this scenario the tenant is going to be required to continue paying rent plus any arrears. If there are rent arrears, the landlord will likely be in a strong position to also ask the Court for “unless orders”. This means orders that unless the rent arrears, costs and default interest are paid by a certain date, the lease will be terminated. 

A good example of this was a recent case of Mounfort v Cheam [2021] NZHC 1535. In this case the tenant had not paid all the rent that was owing. The landlord served a PLA notice and applied to the High Court for a possession order. The tenant opposed the application and applied for relief. Whilst the High Court granted relief, it ordered that the relief was granted on the condition that the tenant pay rent arrears, default interest and legal costs within a short timeframe. In the event that the tenant did not comply with the orders, the Court ordered that the landlord would be entitled to apply for a possession order and cancellation of the lease order on short notice. This left the landlord in a strong position despite having had relief ordered against it.

If the landlord in Mounfort v Cheam had cancelled the lease by re-entering without a Court order, it would have been in an uncertain position for three months (the timeframe within which a tenant can apply for relief under the PLA). Further, the tenant might be in a position to seek compensation as well, depending on the circumstances.

We are available to assist landlords with preparing PLA notices and can assist with any Court proceedings necessary as a result of failure to comply.
Get in touch with us at Urlich Milne Lawyers.

This article has been published for general information purposes only. It is not, nor is it intended to be, treated as legal advice.

Contributed by Oscar Ward - Associate Solicitor