Forfeiture of Commercial Lease: A Short Guide

Forfeiture of commercial lease is a legal mechanism by which a landlord can terminate a lease agreement due to a breach of its terms by the tenant.

This process is governed by both the specific details outlined in the lease contract and the broader statutory framework designed to protect the interests of both parties.

Forfeiture typically arises when a tenant fails to comply with key obligations, such as payment of rent, maintaining the property, or following specific clauses. However, the procedure for enforcing forfeiture is strict, often requiring the landlord to serve a formal notice and provide the tenant an opportunity to remedy the breach.

At Expert Commercial Law, we have access to a highly recommended panel of commercial solicitors experienced in forfeiture of commercial lease proceedings.

If you would like more information on how our panel firms can help you, please do not hesitate to get in touch with our team today.

What are 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. The most common reasons typically include:

Non-Payment of Rent:

If the tenant fails to pay rent, the landlord has the right to forfeit the lease. The lease usually specifies the period after which non-payment constitutes a breach.

Breach of Other Lease Terms:

Violations of any covenants or conditions specified in the lease can be grounds to forfeit the terms of the lease. This can include unauthorised alterations, subletting without consent, or failure to maintain the property.

Nuisance or Illegal Use:

If the tenant engages in activities that cause a nuisance to other tenants or neighbours, or uses the property for illegal purposes, the landlord may have grounds for forfeiture.

Insolvency or Bankruptcy:

The tenant’s insolvency or entering into bankruptcy proceedings can trigger forfeiture if the lease includes an insolvency clause.

What is the process for forfeiture of commercial lease?

The procedure for forfeiting a commercial lease in the UK typically involves the following steps:

Service of a Section 146 Notice:

For breaches other than non-payment of rent, the landlord must serve a notice under Section 146 under the Law of Property Act 1925. This notice must:

• Specify the breach.
• Require the tenant to remedy the breach if it is capable of remedy.
• Require the tenant to pay compensation if the landlord seeks it.

The landlord does not need to make an application to the Court for non payment of rent.

Reasonable Time to Remedy:

The tenant must be given a reasonable amount of time to remedy the breach. What constitutes a “reasonable time” can depend on the nature of the breach and the specifics of the situation.

Re-Entry:

If the tenant fails to remedy the breach or make compensation, the landlord can forfeit the lease and peaceably re-enter the property. This must be done amicably to avoid any legal complications.

Court Proceedings:

Alternatively, or if forfeiture by peaceable re-entry is not possible, the landlord can initiate court proceedings to obtain a possession order to retake possession of the property.

Remedies and relief from forfeiture of commercial lease

Tenants facing forfeiture of a commercial lease have several potential remedies and avenues for relief. These options are designed to protect tenants from unjust forfeiture and to allow them an opportunity to rectify breaches where possible.

For breaches other than non-payment of rent, the landlord must serve a Section 146 notice, giving the tenant a reasonable time to remedy the breach or pay compensation, recognising the terms of the lease. Failure to comply with this requirement can invalidate the forfeiture.

Tenants can apply to the court for relief from forfeiture. This application should be made promptly following the forfeiture. For non-payment of rent, the application should be made within six months of the forfeiture. For other breaches, the timing can vary and should be done as soon as possible.

The court has broad discretion to grant relief, considering certain factors such as:

• The tenant’s willingness and ability to remedy the breach.
• The tenant’s past conduct and reliability.
• The severity and nature of the breach.
• Any potential prejudice to the landlord.

If the dispute is regarding rent payment, the tenant can often prevent or reverse forfeiture by paying rent arrears and any interest or penalties specified in the lease. Tenants can also negotiate payment plans or settlements with the landlord to avoid forfeiture.

If the landlord continues to accept rent or otherwise acts in a manner that acknowledges the continuance of the lease after becoming aware of the breach, they may waive their right to forfeit.

Given the complexity and potential consequences of forfeiture, both landlords and tenants should seek legal advice to navigate the process effectively. A solicitor with expertise in commercial property law can provide legal services and guidance on the specific steps to take and the best strategies to achieve a favourable outcome.

How can Expert Commercial Law assist?

When dealing with forfeiture of commercial lease, it is important to pay attention to detail and seek commercial advice and assistance. A commercial lawyer 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 law firm of solicitors. We maintain a panel of highly professional 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 a wide range of other commercial claims, such as breach of contract, winding up proceedings , statutory demands, shareholder disputes, and intellectual property claims.