Forfeiture of Commercial Lease: A Short Guide

What is forfeiture of commercial lease?

 

The right to forfeiture is a powerful tool in a landlord’s remit. It allows landlords to regain possession of the property when a tenant is in breach of the terms of the lease. Understanding the legal grounds and processes involved in forfeiture is crucial for landlords to protect their commercial property rights effectively.

Legal grounds for forfeiture of commercial lease

 

Forfeiture proceedings can be initiated under several circumstances, but primarily focuses on non-payment of rent and breaches of lease terms.

  • Non-payment of rent: Landlords can forfeit a lease for rent arrears typically after a specified period outlined in the lease. This can be done without needing to serve notice under certain conditions.
  • Breach of lease terms or covenants: Beyond rent arrears, breaches such as failure to repair or unauthorised use of the property can trigger forfeiture, subject to serving a Section 146 notice, barring rent non-payment.
  • Statutory provisions: The Law of Property Act 1925 and the Leasehold Property (Repairs) Act 1938 are pivotal, detailing procedural and substantive law governing forfeiture.

The forfeiture process

Navigating the forfeiture process with due diligence is essential for legal compliance and upholding landlords’ rights.

  • Serving notice: For breaches other than non-payment, a Section 146 notice is mandatory, detailing the breach and allowing the tenant time to remedy it.
  • Peaceable re-entry: This is common in circumstances where tenants forfeit a commercial lease for non payment of rent. Landlords may re-enter the property peaceably for rent arrears without needing to proceed to court for non payment of rent.
  • Court proceedings: In cases where peaceable re-entry isn’t possible or for other breaches, landlords must seek a court order to forfeit the lease.
  • Relief from forfeiture: Tenants have the right to apply for relief, with the court considering factors like the breach severity and remedy attempts.

Practical considerations for landlords

Ensuring a smooth forfeiture process involves careful preparation and adherence to legal requirements.

  • Lease clauses: Clearly defined forfeiture clauses in lease agreements provide a solid foundation for enforcement.
  • Documentation and record keeping: Maintaining thorough records of all breaches, notices, and communications is crucial for legal proceedings.
  • Seeking legal advice: Professional legal advice is indispensable in navigating forfeiture’s complexities. It helps to ensure actions are legally sound and protecting against potential liabilities.

 

Remedies and relief from forfeiture of commercial lease

When a landlord forfeits a commercial lease, typically due to non-payment of rent or breach of lease terms, tenants have the opportunity to seek remedies and relief from forfeiture.

This legal provision allows tenants a chance to rectify their breach and potentially reinstate their lease.

Remedies for Tenants Pre-Forfeiture

Before forfeiture occurs, tenants have several avenues to remedy breaches:

  • Paying arrears: For non-payment of rent, the simplest remedy is to pay the outstanding amount, including any interest and costs incurred by the landlord.
  • Curing breach: For breaches other than non-payment, tenants should rectify the issue within the time frame specified in a Section 146 notice, if applicable.

Taking proactive steps to address breaches can prevent forfeiture and maintain the lease.

Relief from Forfeiture

If a tenant fails to remedy the breach, the landlord can forfeit the lease.

After a lease has been forfeited, tenants can apply to the county court for relief from forfeiture. This is a legal process that, if successful, reinstates the lease. The application must generally be made promptly, usually within 6 months of the forfeiture.

  • Court application: Tenants must apply to the court, demonstrating a willingness and ability to remedy the breach. For rent arrears, this often means paying the outstanding rent plus any costs.
  • Considerations for granting relief: The court considers various factors, including the nature of the breach, previous breaches, the tenant’s conduct, and the impact of forfeiture on the tenant.
  • Discretionary nature: It is important to note that relief from forfeiture is discretionary. This means the court has broad leeway to decide whether to grant it, based on fairness and the specifics of the case.

While relief from forfeiture is tenant-focused, landlords also need to be aware of its implications:

  • Opportunity for resolution: It provides an avenue for landlords to recover owed sums or ensure lease terms are complied with, without the need to find new tenants.
  • Legal costs: Landlords may recover their legal costs from the tenant as part of the relief process, though this is subject to the court’s discretion.
  • Preparation for reinstatement: Landlords should be prepared for the potential reinstatement of the lease and consider how it affects their plans for the property.

 

How can Expert Commercial Law assist?

When dealing with forfeiture of commercial lease, it is important to seek legal advice and assistance. A property law solicitor can ensure the right approach is being taken and that applications are being made correctly and in line with any time limits.

Please note we are not a firm of solicitors. We maintain a panel of trusted and regulated legal experts. If you contact us in relation to a commercial law case, we will pass your case on to a panel firm in return for a fee from our panel firms. We will never charge you for passing on your case to a panel firm.

Each solicitor is vetted before being allowed onto our panel, and we only select the best in the business. All of our solicitor firms are authorised and regulated by the Solicitors Regulation Authority (SRA).

Our solicitors also help with commercial claims, such as breach of contractwinding up proceedings and statutory demands.

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Please note, we are not a firm of solicitors; however, we maintain a panel of trusted and regulated legal experts. If you contact us in relation to a commercial law case, we will pass your case onto a panel firm in return for a fee from our panel firms. We will never charge you for passing on your case to a panel firm. 

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