Is Forfeiture of the Lease an Option for Landlords?
The Law of Property Act 1925, section 146, states a landlord can forfeit a lease for breaches of covenants. This means the landlord can to either peacefully re-enter the property or initiate court proceedings for possession of the property. In essence, the landlord is terminating the Lease.
However, for a Landlord to use the forfeiture procedure the lease must expressly state that there is a right of forfeiture and the clause will need to stipulate as to the alleged breach. A breach of the covenants in a commercial Lease may occur in the following circumstances:
- Failure to pay rent
- Dilapidations issues
- Failure of the obligation to repair
- Criminal activity on the premises
- Insolvency situation.
Is there a right to forfeiture?
If the property is residential or mixed use, the right of forfeiture is conditional on receiving a court order. If an order is not sought, and re-entry takes place, the landlord may be liable for a fine or even imprisonment. Similarly, forfeiture will not be available without a court order if a tenant has fallen into an insolvency situation.
- Peaceful re-entry: This involves the landlord, bailiff or landlord’s agent physically re-entering the property and changing the locks. Entry must be non-violent and cannot be opposed. This is why it is usually conducted outside of office hours.
- Issue and service of possession/forfeiture proceedings: The Lease should determine the service of the proceedings. The Lease comes to an end only when the court makes a judgment for possession.
What is the procedure for forfeiture?
Forfeiture represents a positive and final act, and once initiated by the landlord, cannot be undone. It is important that the intention to forfeit the Lease is communicated by the landlord to the tenant. From the tenant’s point of view, the Lease has not been brought to an end until the court order, and in circumstances the tenant can enforce the landlord’s repair obligations.
Wrongful forfeiture
The landlord has to be careful that he does not initiate forfeiture before a breach has occurred by the tenant. In these circumstances the tenant can make an application to the court for damages or an injunction allowing the tenant back into the property.
Should you consider initiating forfeiture?
It’s important to follow the correct procedure or the consequences for the landlord can be severe. We recommend that professional advice is sought and you aware of your rights and obligations. In some cases, a landlord can actually waive the right to forfeit. This can occur when a landlord is aware of the breach and performs an act which recognises the lease as continuing.
From a practical point of view, considerations as to whether the premises can be re-let quickly, the current business rates and the availability of alternative remedies should assist in determining what action to take.
Are you a landlord considering forfeiture of a lease? Navigating the complexities in this area of law can be challenging, but we can support you in understanding your rights and obligations, and how to avoid potential legal pitfalls. Contact our expert team today for advice on the best course of action tailored to your specific situation.
