FORFEITURE

If a landlord wishes to forfeit a lease, for any other reason than the non-payment of rent, they must serve notice on the tenant pursuant to section 146 of the Law of Property Act 1925. Such notice warns a tenant that the landlord intends to forfeit the lease. It is important to note that a section 146 notice is not necessary if the tenant has failed to pay the rent. The section 146 notice will set out the details of the breach and provide the tenant with a reasonable period to remedy the breach. Should the tenant fail to remedy the breach within the prescribed period the landlord can then either peacefully re-enter the property and take possession or begin court proceedings.

Peaceable re-entry is the simplest method of ending the lease and taking back control and possession of commercial premises. The landlord will normally instruct an independent and certified bailiff to attend with a locksmith to change the locks and put up notices on the premises to notify the tenant that the lease has come to an end.

However, this option cannot be exercised when someone is inside the property, for example an employee or security guard who opposes re-entry.  It is a criminal offence to re-enter if there is someone on the premises. In this situation the landlord will have to proceed with court proceedings, which is often slow and costly.

The act of forfeiture is a method of terminating a commercial lease. If a commercial landlord however inadvertently takes steps to recognise the continued existence of the lease after the purported breach, say for example by demanding rent due after the breach of covenant, the right to forfeit could be waived or lost altogether.

An insolvency event, such as a tenant going into administration, can restrict a right to forfeit even in circumstances where the landlord has already taken steps to issue forfeiture proceedings. A carefully drafted commercial lease could avoid this situation.

As forfeiture is irrevocable, the commercial lease will have terminated and once the tenant has left or been forced out the landlord will have an empty commercial property for which he is likely to be liable for commercial business rates and the costs of day to day repair and maintenance.

A tenant may be able to bring a claim against the landlord for wrongful forfeiture if the landlord exercises its right to forfeit the lease in cases where the legal basis for forfeiture has not arisen. This can have financial implications for the landlord so it is important for landlords to seek legal advice as soon as a breach occurs to determine whether the legal basis to forfeit has arisen.

In certain cases, where a landlord has exercised its right to forfeit a lease, a tenant may be able to apply to the court for relief from forfeiture. This will involve a formal application to the court for relief. When making its decision, the court will consider a range of factors before deciding whether to grant relief.  The main question the court shall consider is whether the adverse impact on the tenant of losing their premises would outweigh the impact on the landlord if relief was granted. Relief is often granted providing that the tenant remedies any outstanding breach, pays all the rental arrears, and also pays the landlord’s legal costs.