If a tenant is in breach of a commercial Lease and you no longer wish for the Lease to continue, one option that you have as a Landlord is to forfeit the Lease.
This article provides you with an overview of how a Landlord can forfeit a commercial Lease. Some examples of reasons why a landlord might wish to forfeit are:
- a tenant is not paying rent;
- a tenant has gone insolvent;
- a tenant has sublet the premises, or carried out alterations without your consent in breach of the Lease;
- a tenant is using the premises for a purpose other than that stipulated in the Lease; or
- a tenant has committed another kind of breach of the agreement.
The rules relating to ending a residential tenancy are different from the above and specific advice should be sought on the particular circumstances.
What is forfeiture?
Forfeiture is a right under the lease to terminate in the event of a default/breach by the tenant.
Forfeiture can be executed by way of peaceable re-entry of the premises or by going to Court to bring forfeiture proceedings.
Does the Lease contain a forfeiture clause?
A Landlord’s right of re-entry derives from the Lease itself. If the Lease provides the Landlord with a right of re-entry the Landlord is able to forfeit the Lease provided that certain procedures, if applicable have been complied with.
Forfeiture is possible if there is no such right contained within the lease, however this is more difficult and is not discussed within this article.
Do I need to serve a notice on the tenant before I can re-enter?
A Landlord cannot enforce their right of peaceable re-entry or commence proceedings until a valid notice under section 146 of the Law of Property Act 1925 is served on the tenant specifying:
- The breach complained of; and
- Requiring the tenant to remedy the breach (if the breach is capable of remedy)
If the breach is capable of remedy and the tenant has not remedied the breach within a reasonable amount of time the Landlord will then be in a position to enforce its right of forfeiture.
If the Landlord wishes to exercise his right to re-enter due to the tenant not paying rent, a section 146 notice is not required and the Landlord may re-enter the premises provided that he has complied with the terms of the re-entry/forfeiture provision contained in the lease.
Have I waived my right to forfeit the Lease?
Before a Landlord takes that final step to forfeit the lease, it must be considered whether the Landlord has waived his right to forfeit.
If the Landlord has had knowledge of the breach and then treats the lease as continuing, he could have waived his right to forfeit.
For example, if the tenant has not paid rent and the Landlord continues to demand rent or accept rent this is likely to be constituted as a waiver.
If you need assistance or advice with forfeiture of a commercial lease please do not hesitate to contact Danielle Dyer, a solicitor in our dispute resolution department.
This article is not a definitive statement of the law. It is designed as a free update on the law at the time of publishing. It is not a substitute for legal advice on specific facts and circumstances. BakerLaw LLP and/or the writer accepts no liability or responsibility for reliance on this article and recommends that you seek independent legal advice on your specific circumstances prior to taking any steps.