The forfeiture of a commercial lease is a powerful tool available to landlords in the event of a tenant's breach. It allows the landlord to terminate the lease and reclaim possession of the property. Understanding how this process works is essential for both landlords and tenants.
The forfeiture of a commercial lease is a powerful tool available to landlords in the event of a tenant's breach. It allows the landlord to terminate the lease and reclaim possession of the property. Understanding how this process works is essential for both landlords and tenants.
Forfeiture is typically considered after a breach of the lease terms by the tenant, commonly referred to as covenants. Depending on the nature of the breach, landlords have various options which include an immediate re-entry, but for cases like non-payment of rent, a Notice will need to be served in the correct manner.
The type of breach must be first identified and the necessary appropriate response taken. For non-rent related breaches, landlords must adhere to the statutory notice procedure under section 146 of the Law of Property Act 1925. This involves serving a written notice that outlines the nature of the breach, the remedy (if possible), and any compensation expected.
The process demands a meticulous approach. If a landlord forfeits a lease without a valid legal reason then, they could face a wrongful forfeiture claim which underlines the importance of professional legal advice at the earliest sign of a breach.
Once the right to forfeit is established, and if the tenant fails to remedy the breach or provide compensation, landlords have two paths: peaceful re-entry or court proceedings to enforce forfeiture.
Landlords should be cautious not to inadvertently waive their right to forfeiture. Actions that acknowledge the lease's continuation post-breach, such as demanding rent, can constitute a waiver. The implications of this waiver depend on whether the breach is 'once and for all' or 'continuing.' The former type of breach may see the forfeiture right waived, while the latter may not.
The Tenant’s insolvency could potentially further complicate matters, restricting a landlord's right to forfeit even if forfeiture steps are underway.
At Freers Askew Bunting, we specialise in guiding landlords through the intricacies of lease forfeiture. Our services encompass thorough lease reviews, advising on the establishment of forfeiture rights, and navigating the statutory notice process. We also assist in managing the delicate balance between enforcement actions and potential waivers of the right to forfeit.
In each step, our goal is to provide clarity and legally sound strategies to ensure landlords can assert their rights without exposing themselves to unnecessary risks. Our expertise in negotiation and the legal rights of both landlords and tenants ensures the best possible outcome for all parties involved.
For landlords facing the complexities of lease forfeiture, or tenants seeking to understand their position and rights, Freers Askew Bunting offers the expertise and guidance needed to navigate these challenging waters.
Get in touch with Andrew or a member of the Commercial Property Team here.
