• 05 APR 17
    A landlord’s guide to forfeiting a commercial lease

    A landlord’s guide to forfeiting a commercial lease

    In the current economic climate, it is not uncommon for tenants to struggle to meet rental payments and fall into arrears.

    But what happens if you are a landlord and left in this precarious position? Here, Eleanor Cornthwaite explains what your rights are as a landlord and explores what you can do to reassert control over your assets.

    What is forfeiture and when can I forfeit?

    One of the remedies available is forfeiture. The right to forfeit is a solution for landlords which brings a lease to an end following a tenant’s default.

    A clause in the lease is required to enable the landlord to forfeit or re-enter the premises under certain circumstances, such as non-payment of rent.

    How do I enforce forfeiture?

    The landlord must communicate an unequivocal intention to bring the lease to an end.

    With commercial premises, there are two options available to landlords – forfeiture by peaceable re-entry or by issuing court proceedings.

    Peaceable re-entry is the act of re-entering and securing the premises. This is commonly enforced by a certified bailiff who attends with a locksmith to change the locks and affix notices to the premises, letting the tenant know that the lease has been brought to an end.

    For breaches of a commercial lease, other than non-payment of rent, there are procedural restrictions on the right to forfeit. For example, landlords need to serve a section 146 notice before they can forfeit for breach of a repairing covenant.

    Can I change my mind once I have forfeited?

    Forfeiture is irrevocable. The lease will have come to an end and if the tenant does not want the property back, you will be left with a vacant property. You therefore need to properly consider whether forfeiture is the right remedy for you.

    If the landlord and tenant agree that the tenant is entitled to remain, it is not as simple as allowing the tenant back into the property. Generally, a new lease will be required.

    If you do not make sure that the basis of occupation is formally re-documented, then you may face a whole host of issues upon term expiry, for example, the tenant may have gained security of tenure.

    Am I guaranteed to get the property back once I forfeit the lease?

    Unfortunately not. A tenant, sub-tenant and mortgagee could apply to court for relief from forfeiture, either in response to a landlord’s claim or by bringing a standalone claim of its own.

    If successful, the lease may be re-instated or the court may order relief on certain conditions, such as payment of money to the landlord or on the understanding that certain action is taken within a specific period of time.

    Forfeiture is a complex area of law, so it’s vital that you seek specialist legal advice. For more information on forfeiture, contact Eleanor Cornthwaite on 0161 761 4611 or email her at eleanor.cornthwaite@whnsolicitors.co.uk