It is not uncommon for tenants to face difficulties in meeting their rental obligations. This situation often places landlords in a precarious position, uncertain about their legal rights while striving to maintain a steady rental income. One remedy available to landlords in such circumstances is the right of forfeiture. The law surrounding forfeiture is complex and must be handled carefully to avoid pitfalls.
What is forfeiture?
Forfeiture is the landlord’s legal right to terminate a lease where the tenant has breached its obligation under a lease. It is a contractual remedy that must be provided for within the lease.
Is there a right to forfeit?
If a lease is forfeited without a valid right, the tenant could potentially have a claim against a landlord for any damages / loss of business caused. Therefore, it is essential that a landlord establishes their right to forfeit beyond doubt in the first instance.
How the right to forfeiture is exercised will be dependent on the nature in which the lease has been breached.
Failure to pay rent
Where the tenant has failed to pay rent, a landlord may exercise forfeiture by peaceable re-entry.
Peaceable re-entry is the act of regaining physical possession of the property. While a landlord may use some force in re-entering the property, the force should not be excessive. If anyone is present at the property, they will not be able to be forcibly removed without an order from the Court and the police being present. We would recommend instructing a certified bailiff to carry out the re-entry procedure on the landlord’s behalf.
A landlord needs to ensure that the re-entry is unequivocal. This commonly involves taking steps to prevent the tenant from re-entering the property, such as changing the locks and/or otherwise securing the property.
Once the re-entry has taken place, the landlord should ensure that a clear and visible notice is placed on the property. The notice must provide specific information such as advising that the lease has been forfeited and providing full contact information for the landlord.
Other breaches of the lease
For all breaches other than non-payment of rent such as unauthorised subletting, alterations without consent and failure to keep the property in good repair, landlords must serve a notice under section 146 of the Law and Property Act 1925 (“Section 146 Notice”) on the tenant.
The Section 146 Notice should specify details of the breach, the action required to remedy the breach and a timeframe for the breach to be remedied. The notice must be served by the specific notice provisions set out within the lease.
If the tenant fails to remedy the breach within the time frame specified, the landlord can seek to peaceably re-enter the property (as set out above) or issue proceedings at court.
Common pitfalls landlords make during forfeiture
A landlord should be careful not to do anything that might be deemed to waive its right to forfeiture.
Waiver can happen in several ways and, depending on the type of breach, if waiver is established, it could waive the right entirely. This would depend on whether the breach is considered a “continuing” breach or a “once and for all” breach. Discussion of these types of breaches is outside the scope of this note.
Waiver is established the landlord expressly or impliedly acknowledges the continued existence of the lease. Most commonly, this would be by demanding and / or accepting any rent payment or openly communicating with the tenant in relation to the breaches.
Further common mistakes made by landlords in relation to forfeiture can include:
• Failure to check the lease – landlords must ensure that the lease contains an express forfeiture clause as this is not implied.
• Serving an invalid Section 146 Notice – landlords must serve the notice and allow a reasonable time for the tenant to remedy the breach (even where the breach seems incapable of remedy). The notice must be given in the specific form set out in Section 146 of the Law of Property Act 1925.
Both forfeiture and waiver can be complex and difficult to navigate, so a landlord should seek professional legal advice as soon as possible on becoming aware of a breach for which forfeiture is a consideration. Our commercial litigation solicitors at BPE can provide advice tailored to your situation and would be happy to assist. Please click here to contact a member of the team.
