Rent Forfeiture and Forfeiture of Commercial Lease in Essex, Romford, and Brentwood
Rent Forfeiture Meaning: Definition and Implications Addressing Disputes Related to Commercial Lease Forfeiture
Forfeiture is a landlord’s right to bring a lease to an end as a result of a tenant’s breach. A landlord may only end the tenancy agreement by forfeiture if there is an express right in the lease.
Exploring the Uses and Implications of Forfeiture in Commercial Lease Agreements
Forfeiture occurs when a Landlord exercises their rights under a lease to regain possession of their property where a Tenant is in breach.
In order to exercise this right, you must have the express written right to forfeit contained within your lease. If there is no written lease you are very unlikely to have this right.
Forfeiture will allow a Landlord to take back possession and control of their property from a tenant that has failed to pay their rent.
Advantages of Legal Assistance for Forfeiture Disputes by Mullis & Peake
Forfeiture may seem a simply process, in which you can just go in and change the locks and exclude your tenant from the premises. However, there are many pitfalls for a landlord to fall into throughout this process. Carrying out the process incorrectly could result in the Tenant obtaining relief and potentially being awarded costs against the landlord.
Our team can provide you with the specialist advice you need to help you avoid these pitfalls and to obtain back possession of your property in the most succinct way.
Preparing for Forfeiture: What You Need to Know
The steps you take to forfeit a lease will be determined by the type of breach that has occurred. If you are seeking to forfeit the lease for non-payment of rent then subject to the terms of the lease, you do not need to serve a section 146 notice on the tenant before you intend to forfeit the lease.
Where you are seeking to forfeit a lease for another breach i.e. unlawful assignment, disrepair, unlawful or immoral use, you are required to serve a section 146 notice upon the tenant first giving them a reasonable period of time to rectify the breach. The Law of Property Act 1925 specifies the details which must be included in this notice to make it valid.
Consideration will also need to be given to the use of the premises, such as whether it is for commercial use only or mixed use, therefore consisting of both commercial and residential premises.
You will need to review the rights granted by the lease, to ensure that you have the express right to Forfeit and to assess when that right allows you to take action. You need to be sure that the right to forfeit has arisen and that the right granted in the lease covers the breach in question.
You also need to consider if the lease sets out a procedure which needs to be followed and ensure that this is complied with.
One of the most important factors which will need to be considered is whether the Landlord has waived their right to forfeit for this breach and a decision needs to be made on how you plan to carry out the forfeiture- by peaceable re-entry or court proceedings.
Landlord should also considered the practical considerations of forfeiture and the implications it may have for them, such as can the breach be easily remedied by the Tenant, will they be able to get relief, who will be paying the business rates/insurance etc., what is the current market rent in comparison to the rent under the Lease, do you have anyone else to move into the premises and is there any other options to remedy the situation.
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Executing Forfeiture: Steps and Procedures
If the Tenant fails to remedy the breach or pay the rent then the Landlord can exercise their right to forfeit the lease by one of following methods;
- Peaceable re-entry
- By Court proceedings
Peaceable re-entry is generally the preferred options as it is quicker and more costs effective.
Peaceable re-entry would usually be carried by an experienced bailiff, they will enter the premises at a time when no one is in the premises and change the locks and place notices upon the premises that the Landlord has taken back possession.
Alternatively, court proceedings can be issued to get an order from the court that the tenants’ lease has come to an end.
Understanding the Waiver of Forfeiture RightsÂ
Whichever method you choose, care must be taken to ensure that you do not waive your right to forfeit. Waiving the right to forfeit is doing or committing any act that expressly or impliedly recognises the continuing existence of the lease. A landlord will be waiving the right to forfeit if they have knowledge of the breach and then recognise the lease as continuing.
Common examples of waiver are:
- demanding or accepting rent
- granting a licence to assign or to sublet
- serving notices under the lease
- arranging an inspection
- seeking an injunction regarding a breach
Whether or not waiver will be fatal to the right to forfeit depends on whether the breach is of a continuing or a once-and-for-all nature.
Essential Steps to Take Before Forfeiting a Commercial Lease
- Check the lease terms
- Check the procedure under the lease
- Instruct a solicitor to review the lease and advise you
- Consider what breaches the Tenant has made and when you became aware of them
- Be aware of when you will waive your rights
- Serve notice if necessary
- Review the overall situation to determine if forfeiture is the best way forwards
Dealing with Non-Payment of Rent: Strategies and Solutions
When a landlord is faced with a non-paying tenant, one of the first things we will ask any Landlord is whether the Tenant ‘can’t pay’ or ‘won’t pay’. It is important to understand why the arrears has built up and to assess if the current situation can be remedied. Often the first port of call will be for the Landlord to have a discussion with the tenant and if this does not rectify the situation then consideration needs to be given to the legal options available.
There are various options available to landlords, these include:
- CRAR
- Guarantors
- Rent Deposits
- County Court Judgment
- Insolvency
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Implementing Forfeiture of Commercial Lease: Peaceable Re-Entry
Subject to the statutory limitations on a landlord's right to forfeit, the landlord may physically re-enter the property and bring the lease to an end without the need for court proceedings. Physical re-entry is effected by the landlord manifesting its intention to forfeit the lease, usually by changing the locks. If the lease consists of open land, the intention can be manifested by affixing chains across entrances and attaching notices of forfeiture.
There are statutory restrictions in respect of peaceable re-entry which must be considered such as the Criminal Law Act 1977 makes it is a criminal offence to threaten or use force to gain entry when someone is physically at the premises and opposes re-entry and The Protection from Eviction Act 1977 makes it is unlawful to peaceably re-enter a dwelling while someone is lawfully residing at the premises.
Peaceable re-entry must be carried out at a time when the premises is unoccupied, such as late at night or the early hours of the morning. We would generally advise for a landlord to instruct a bailiff to carry out the procedure for them, as the bailiff will also post the relevant notices on the property.
Understanding the Limitations of Peaceable Re-Entry in Mixed-UseÂ
The Protection from Eviction Act 1977 makes it is a criminal offence to peaceably re-enter a dwelling while someone is lawfully residing at the premises. Accordingly, in the context of residential premises, in most instances a landlord will need to forfeit by court proceedings.
Resorting to Forfeiture by Court Proceedings: Legal Aspects and Considerations
If a landlord decides to forfeit by way of court proceedings this may be by choice or because they are forced to by the fact the premises is mixed use. What this means is that a claim will need to issued in the court for possession of the property by way of a claim form and particulars of claim. The court will later list a hearing for the claim to be determined.
Technically the lease is bought to an end at the point that the court proceeding are served upon the Tenant by the court, however there may be some time between the court serving the claim and the matter actually being determined by the court.
During this period the Landlord is treating the lease as ended and the Tenant remains in occupation.
Exploring Relief Options from Forfeiture
Once forfeiture has been effected, the landlord and tenant do not have any continuing liabilities under the lease, although they remain liable for any breaches which occurred prior to the forfeiture. A tenant has the right to apply for relief from forfeiture as soon as a section 146 notice has been served, or forfeiture has been effected. The tenant would need to make an application to court for relief from forfeiture, a court application is required regardless of the method of forfeiture undertaken by the landlord.  The court’s approach to granting relief differs, depending on the type of breach. For non-payment of rent—the court will, as a general rule, automatically grant relief where the tenant pays all arrears and the landlord’s costs. In the forfeiture was for breaches other than non-payment of rent—the court will have regard to factors such as the seriousness of the breach, the conduct of the parties, an any consequential loss suffered by the landlord as against the potential loss by the tenant if relief was not granted
In the event that relief is granted, the lease will be reinstated.
Dealing with Goods Inside the Property: Legal Considerations
Once a possession order has been executed, if the former tenant has left any goods at the premises (in the absence of any express terms in the lease dealing with this scenario) the landlord will become essentially the carer of the tenant’s goods and could be liable to the tenant if they sell the tenant’s goods and offset them against arrears, or liable for damages if they dispose of the tenant’s goods.
Notifying Tenants: Torts Notice and Supervised Re-Entry
The landlord can serve a notice under the Torts (Interference with Goods) Act 1977, giving the former tenant (and/or any third party owners) a specified reasonable period of notice to collect the goods, failing which the landlord will be entitled to sell any of the tenant’s goods in saleable condition and offset the costs of sale against the proceeds, returning the balance to the former tenant.
Understanding the Practical Overview of Forfeiting Commercial Leases
- Costs implications to forfeiture
- Can the breach be remedied
- Is the lease protected under the 1954 Act
- What are landlord intentions for the property
- Current market rent
- Tenants financial position
- Do you have a new potential tenant to fill the property
- Will the Tenant seek relief
- Are there any insolvency arrangement in place which may restrict the landlords rights.
Mechanisms Involved in Commercial Lease Forfeiture
- Peaceable re-entry
- Court Proceedings
Exploring Relief Options for Forfeiture Cases
- Peaceable re-entry
- Court Proceedings
Forfeiture for Breaches Other Than Rent: Legal Implications
If the breach is for anything other than the non-payment of rent, before a Landlord can forfeit the lease they will need to serve a notice on the Tenant. This notice must identify the breach and allow the Tenant a reasonable amount of time to remedy the breach.
If after that reasonable amount of time, the tenant has failed to rectify the breach, the Landlord may proceed to forfeit the lease.
Terms of Relief in Forfeiture Cases Beyond Non-Payment of Rent
If the breach is for anything other than the non-payment of rent, before a Landlord can forfeit the lease they will need to serve a notice on the Tenant. This notice must identify the breach and allow the Tenant a reasonable amount of time to remedy the breach.
If after that reasonable amount of time, the tenant has failed to rectify the breach, the Landlord may proceed to forfeit the lease.
Addressing Forfeiture for Non-Payment of Rent: Legal Procedures and Rights
The first step will be to serve a section 146 notice, this notice must identify the breach, require the tenant to remedy the breach and be served before the breach is remedied.
Once the notice has been served, if the Tenant fails to comply with the notice the Landlord may forfeit the lease by way of peaceable re-entry or the issue of court proceedings.
Meet Our Specialists:
Holly Minney and William Cook are Mullis & Peake’s specialists in rent forfeiture and forfeiture of commercial lease in Essex, Romford, Brentwood and Upminster.
Frequently asked questions
Forfeiture is a landlord’s right to bring a lease to an end as a result of a tenant’s breach.
A landlord may only end the tenancy agreement by forfeiture if there is an express right in the lease.
As the tenant, you must apply to the court for relief from forfeiture.Â
A forfeiture notice is the written notice that the landlord serves upon the tenant advising that the property has been subject to the forfeiture process by the landlord.
Is a clause is in a lease agreements giving the landlord the right to forfeit the lease, it will usually also express how and when that right can be exercised.
Relief from forfeiture is an application the Tenant can make to the court, to seek the overturing of the forfeiture, if they are successful the Tenant will be allowed back into the property.
A forfeiture lease indemnity policy is a policy of insurance which is a designed to cover a mortgage lender for a situation where a lease is forfeited, this is generally more applicable to residential leases.
Mullis & Peake have a team in commercial disputes ready to help you. Contact us online today or call us on 01708 784000.
Alternatively, request a call back to have one of our people contact you at a time that suits.
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Holly is a Member and Head of Mullis and Peake’s Dispute Resolution Department
Martyn ​is our Chairman and the firms' Compliance Officer for Legal Practice
