Up until mid-2020, the Act required landlords and lenders to give:
- (for mortgages) a borrower who is in default under their loan, a minimum notice period of at least 20 working days to remedy their default; and
- (for commercial leases) a tenant who is in default in respect of the payment of rent due under the lease, a minimum notice period of at least 10 working days to remedy their default,
(together, the Minimum Notice Periods).
In May 2020, as part of its response to the COVID-19 pandemic, the New Zealand Government temporarily amended the Act to extend the Minimum Notice Periods to:
- 40 working days (vs. the previous 20 working days) for mortgage defaults that occur between 1 April 2020 until six months after the Epidemic Preparedness (COVID-19) Notice (Notice) expires or is revoked; and
- 30 working days (vs. the previous 10 working days) for lease rental defaults that occur between 1 April 2020 until six months after the Notice expires or is revoked.
The Notice expired on 20 October 2022. Accordingly:
- for mortgage defaults that occur on or after 20 April 2023, the Minimum Notice Period will revert back to the original period (i.e. 20 working days); and
- for commercial lease rental defaults that occur on or after 20 April 2023, the Minimum Notice Period will revert back to the original period (i.e. 10 working days).
It is important to note that it is the date of default (rather than the date of the notice) which is relevant in terms of which Minimum Notice Period should be used in a notice. If the default mortgage or commercial lease rental default occurred between 1 April 2020 and 19 April 2023, the notice should still include the extended Minimum Notice Periods.
No changes were made to the minimum notice period that a landlord must give to a tenant who is in default for breaches that do not relate to the non-payment of rent (for example, breaching maintenance obligations). For these breaches, the Act has always required the notice period to be one that is “reasonable in the circumstances”. What is “reasonable” in this context will turn on a number of factors, such as the nature of the breach.
Default notices under the Act are clearly important documents that must, in addition to allowing for the Minimum Notice Periods, meet other strict requirements in order to be valid. Legal advice should always be sought by lenders/landlords who wish to issue a default notice, and by borrowers/tenants who receive a default notice.
If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.