01 July 2020

A good example of a breach of contract is when the lease agreement stipulates that no permanent renovations can be made to the property and your current tenant decides they’d much prefer an open plan kitchen and lounge area, so they knock down the wall separating the two. Not only is this a breach of contract, but it’s also a landlord’s worst nightmare. Luckily, a legally binding contract comes equipped with clauses that protect both the tenant and the landlord for these situations.

What is a breach of contract?

A breach of contract can be defined as a legal cause of action in which a legally binding agreement is not honoured by one or more parties who have signed the contract. A breach of contract occurs when one of the parties fails to perform or performs late on their contractual obligation. For example, if you’re a landlord and your tenant has not paid rent for the last 3 months, this can be seen as a breach of the lease agreement. However, if your tenant is late with their payment, you can’t just evict them as you’ll have to follow certain steps to handle a late-paying tenant.  

What can landlords do about it?

If the breach is minor, the landlord can give the tenant notice to repair or correct the breach. According to the Consumer Protection Act (CPA), landlords must give 20 working days’ notice to their tenants to allow them to rectify the breach of contract. Should your tenant fail to fix the issue within the given timeframe, the lease can be cancelled by providing a notice of cancellation. For a major or material breach in contract, landlords can cancel the lease completely and instruct the tenant move out immediately.

Landlords may also add clauses that can protect them should their tenant break the agreement by, for example, stating that they have the right to cancel the lease agreement should the tenant fail to pay his or her municipal charges on time. However, even if these clauses are in place, landlords still have to follow the correct procedures for cancelling a lease agreement. According to The Rental Housing Act, any cancellation must be done within a fair practice.

Is ending the lease agreement early a breach of contract?

The answer to the question will depend on the cancellation clause within the lease agreement. Unless there are grounds for cancellation of the agreement, which is stipulated in the cancellation clause, it can be rather difficult to get out of a lease agreement without any recourse. Even if the lease agreement doesn’t contain a cancellation clause, the tenant can still be considered to be in breach of the agreement if they decide to terminate the contract prematurely.

Final advice

If you’re a landlord or considering buying a property to rent out, reach out to a real estate professional who can help you draft a lease agreement. Dealing with a breach of contract is never easy, so if you’re feeling uncertain about the agreement you currently have consider seeking legal guidance.

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