The ability to forfeit a lease allows a landlord in certain circumstances to re-enter the property following a breach of a provision of the lease (a covenant) by the tenant. Depending upon the nature of the breach, the landlord can re-take possession of the property immediately by ‘peaceably re-entering’ or following a period of notice.
In the alternative, the landlord can issue court proceedings for forfeiture after the notice has been served or immediately if the breach complained of is non-payment of rent.
We advise on all aspects of the forfeiture process, including:
Our team also frequently act for tenants by advising on whether forfeiture by the landlord is wrongful and issuing proceedings seeking relief from forfeiture, which, if successful, effectively reinstates the lease as if it had never been forfeited.
To successfully forfeit a lease, a landlord will need to establish a right to do so. Commonly, landlords are able to rely on a specific covenant that has been breached. However, landlords should proceed with caution because if a lease is forfeited when the right to forfeit has not arisen, the tenant will be able to bring a claim for wrongful forfeiture. It is therefore important to obtain legal advice as soon as a breach occurs.
Once a right to forfeit has been established, save for cases involving unpaid rent, the landlord must follow a statutory notice procedure and serve a written notice pursuant to section 146 of the Law of Property Act 1925.
A section 146 notice has to specify the following:
The notice must be served in accordance with the specific notice provisions contained within the lease.
In the event that the tenant fails to remedy the breach within a reasonable time, or fails to pay compensation to the landlord to their satisfaction, then the landlord can either peaceably re-enter the property or issue court proceedings, seeking forfeiture of the lease.
It is possible for a landlord to inadvertently lose the right to forfeit by taking steps that recognise the continued existence of the lease. This is where the landlord (or someone acting on their behalf with knowledge of the circumstances that give rise to a right to forfeit) acts unequivocally by recognising the continued existence of the lease and communicating this to the tenant.
This frequently involves the landlord or their agent demanding rent which falls due after the covenant has been breached. The severity of taking such a step depends upon whether the breach is classed as ‘once and for all’ or ‘continuing’. The latter will survive an act that constitutes a waiver of the right to forfeit; however, the former will not.
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.
Our client - the freehold owner of a mixed-use commercial and residential unit - contacted us when their tenant (a retailer) failed to make payment of the most recent quarter’s rent. Within 48 hours of instruction, we had instructed agents to peaceably re-enter the property and change the locks.
To speak to a member of the property litigation team about forfeiture of commercial leases, get in touch by calling 0345 872 6666, or by filling in our online contact form.
