Lease agreements provide the basis of a structured framework for both landlords and tenants. However, in the terms of lease agreements, there usually lies the clause allowing of forfeiture—an action that can have significant legal and financial implications for both parties involved. In this blog, we will look at what forfeiture of commercial leases entails, its legal basis, common scenarios where forfeiture may occur, and considerations for both landlords and tenants.
Forfeiture refers to the ending or determination of a lease by the landlord due to the tenant’s breach of lease terms. This breach is most often non-payment of rent but other violations specified in the lease agreement can also trigger forfeiture. By swiftly evicting a non-compliant tenant through forfeiture, the landlord can minimise financial losses associated with unpaid rent or other breaches of lease terms.
The landlord can forfeit the lease by either by instructing enforcement agents to peaceably re-enter the premises (literally going in, changing the locks) or by starting court proceedings for possession of the property.
Non-payment of Rent
Historically, where a tenant does not pay rent, the landlord had a right to simply re-enter the premises, and re-take control by changing the locks. This process, known as ‘re-entry’, was a common law right – something recognised by English courts for centuries. That right, still applies today, however, the right to re-enter is almost always expressly stipulated in within the terms of a modern commercial lease.
Breach of Lease Covenants
Lease agreements contain various covenants or pledges that tenants and landlords must comply with. Actions by the tenant such as unauthorised alterations, subletting, or usage of the premises and insolvency of the tenant are common breaches that can provide grounds to forfeit if not rectified within the specified timeframe.
If this is the case landlords must first serve notice on the tenant specifying the breach and allowing the tenant to remedy it within a fixed timeframe. The notice requirements vary depending on the nature of the breach so it is important for the Landlord to serve the notice in the correct form. An incorrect notice may be render it invalid. London Bailiff Services (LBS) partner solicitors are experts in the drafting these notices.
Peaceable Entry
By instructing a Certificated Enforcement Agent such as London Bailiff Services to physically re-enter the premises usually out of working hours. The re-entry must be peaceable, which means that if a person is present on the premises who opposes the use of force to gain entry, then the action will be abandoned. The landlord and Enforcement Agent may commit a criminal offence if any violence is threatened or used. Peaceable entry by LBS is effected by a professional locksmith.
Forfeiture by issuing proceedings
This is done by issuing a claim for possession on the grounds of breach of conditions of the lease. This is done using the claim form N5 and with particulars of claim setting out terms of the lease, the breach and the claim for possession and any legal costs. It is not until the court orders possession, recognising the forfeiture, that a lease will actually come to an end. Landlords are often entitled to recover its legal costs of the process under the terms of the lease. Our partner solicitors are able to both issue proceedings and represent landlords at court in these cases. If the tenant ignores the courts order to surrender the premises LBs enforcement agents can take steps to enter and take possession of the premises.
Can The Tenant Appeal Against Forfeiture ?
Yes, a tenant, or a sub-tenant (even an unlawful one) can apply to court for relief from forfeiture. They will usually need to show evidence that they have remedied any breach of terms, paid the full rent owed by the date of the hearing, and paid the landlord’s costs for bringing the action. If at the date of the hearing the rent and landlord’s costs are paid, the court may award relief, which will mean that the lease continues as if it had never been forfeit.
Here to Help
Forfeiture of lease is one of the most powerful weapons in a landlord’s arsenal for dealing with rent arrears and other breaches of the lease. It is both quick, and cost effective but should not be entered into lightly. London Bailiff services and their partner solicitors have considerable experience and expertise in the commercial rent sector and are able to take you through the forfeiture procedure from start to finish. Learn more about how we can help here CLICK HERE
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