Wave goodbye to your right to forfeit
Posted by Owen McKenna Apr 12th, 2009.
You only have to look at the high street and read the newspapers to see that the number of empty premises has increased and tenant administrations are on the rise. Clearly, in today’s economic climate there are a number of new challenges facing landlords and tenants of commercial leases. One such challenge facing a landlord is what to do in the event of tenant breach.
Forfeiture is a landlord’s right to re-enter the premises and determine the lease on breach by the tenant of its lease covenants or upon the happening of certain specified events. The right is not automatic, it exists only where the lease expressly includes such a right. Most commercial leases however will contain a clause thereby allowing the landlord to re-enter the premises on the happening of specified events.
Before a landlord proceeds to forfeit a lease, it should consider carefully the consequences of so doing. In a rising market a landlord should have no difficulty in subsequently re-letting the premises. However, in a falling market, re-letting premises may not be so easy and as a result of the forfeiture a landlord may be left with an empty property on their hands for a long time, and of course following the recent legislative changes, a potential business rates liability. Nevertheless, forfeiture remains an important tool in a landlord’s armoury in the event of tenant breach and the challenge for a landlord therefore is to avoid losing or “waiving” the right to forfeit.
A landlord will be prevented from forfeiting a lease if it has expressly or impliedly waived the right to forfeit. A landlord will still be able to pursue other remedies but will have lost the right to forfeit. Waiver will be implied in the following circumstances:
• A landlord knows of the relevant breach; and
• A landlord (or its agent) does some unequivocal act which recognises the continued existence of the lease, and that is communicated to the tenant.
Waiver is not a however a question of intention. So long as the act is inconsistent with an intention to determine the lease the motive for the act is irrelevant.
Waiver operates in respect of past breaches of covenant. Generally waiver will be relevant only in the case of “once and for all” breaches (for example unlawful assignment/subletting or unlawful alterations), where in the event of waiver the right to forfeit is lost forever. If however the breach is of a continuing nature (for example failure to insure or failure the keep premises in repair) the right to forfeit, though waived on one occasion, will arise again.
The number of cases that have come before the courts over the years on the issue of waiver is significant but unfortunately uncertainty remains. Circumstances which have been held to constitute waiver include accepting rent due after the date on which the right to forfeit arose, demanding rent due after the breach, enforcing other covenants in the lease or granting licence to assign or sublet. Since waiver is not a question of intention and as a landlord is deemed to have the knowledge of its employees, an accounts team for example sending out rent demand or banking a cheque at the wrong moment may result in the loss of the right to forfeit.
The safest course for a landlord on becoming aware of a breach if it wishes to preserve its right to forfeit, is not to make any demands for rent due after the breach and to refuse to accept all rent.
Please do not hesitate to contact me if you require any further information on the issue of forfeiture or waiving the right to forfeit.
9 Comments
By Owen McKenna on April 15th, 2009
Hi Liz
Forfeiture is a process by which a landlord exercises a right contained in a lease. The right to forfeit exists only where the lease expressly provides for it: if there is no written lease the landlord cannot have a right to forfeit.
The bailiff’s reference to the Rent Act 1988 and the Human Rights Act 1998 is incorrect. There is no Rent Act 1988 although there is a Housing Act 1988 but this applies to residential properties and not commercial premises. Furthermore, the Human Rights Act 1998 does not convey a right on a landlord to evict a commercial tenant.
The common law argument is less clear and it is possible that the landlord may theoretically have an argument that a repudiatory breach of contract has taken place i.e. the non-payment of rent, which has given the landlord the right to terminate its obligations under the contract. Before being able to advise further a full investigation of the facts would be required.
Please give me a call if you wish to discuss further.
Owen
By alex bashir on December 1st, 2009
Club premises. Commercial Lease.Tenant not paid rent for over a year.Lease have expired.Tenant is in breach on several Lease clauses.Local Authority rates the property as a commerecial premises.
Bailiffs were instructed to forfeit the lease and secure the premises but on arrival were met by the son of the tenant(who is unknown to the Landlord) claiming he is living on the premises and that is not moving.
Landlord wants the property back without going to Court (the expense).
Any advice Please
By David White on December 17th, 2009
Hi
I took on a commercial lease in a shoping mall. The landlord granted further leases to similar business and we suffered as a consequence. We discussed this with our landlord who didnt want to know and offered no support. We closed the shop and now the landlord is threatening court action to recover outstanding monies. I call round to the unit today and the landlord was using the unit as storage for a subcontractors equipment!! Can he do this? Is this a breach on his part?
Your advise would be appreciated.
By John Chesworth on December 22nd, 2009
Hi Alex
I have seen your earlier comments and I think there is a major problem with the individual who is claiming to occupy the property as a residence. If a court found as a fact he was occupying the property as a residence they would also find that any eviction without a court order was unlaful.
If you have evidence that his claim to occupy the property as a residence is a sham, then you could take a risk and seek to reposses by peaceable re-entry when he is not present at the property. However, this is an extremely risky strategy, the compensation that a court would order would far exceed the £750 – £1000 plus VAT and court fees it would cost to get a possession order and ensure the landlord keeps on the right side of the law.
Regards
John
By John Chesworth on December 22nd, 2009
Hi David
You post raises some interesting points. There have been cases where a landlord of a shopping mall was held to have been liable to a tenant where his letting policy had damaged the tenant’s business. If the landlord had given you assurances that he would not let to similar businesses you may have a case. However, a detailed examination of your lease and the facts of the case would be required before advice could be given on this topic.
In relation to the landlord’s use of your premises as storage, this appears to me have been an act of forfeiture by taking possession. Has the landlord changed the locks? He is entitled to do so if the lease has a forfeiture provision and the rent is over due by the number of days stated in that provision.
If the landlord has changed the locks and lawfully forfeited the lease, then no future rent will be payable, although you will be liable for all rent that fell due up to the date he forfeited the lease.
I hope this helps.
John
By Barry Watkins on January 21st, 2010
I have a ten year lease on a commercial industrial unit with a 6 year break clause and was signed in my personal name January 2009. The rent was due on the 25th December 2009 of £3120.00 and a clause in my lease says that if after 14 days if the rent has not been paid that the landlord can regain peaceful entry.
I wrote to the landlord by hand and this was posted by hand at the beginning of some 14 days to his home address stating that I have been ill for some time and away having treatment and that I am fully recovered but cash flow at the business has suffered due to the fact that I have not been chasing monies owed.
Staff arrived today to find a notice on the door from a company called “County Bailiff Company” stating my name and “PURSUANT TO CLAUSE (18) OF YOUR LEASE DATED THE 30TH JANUARY 2009 WE ARE AUTHERISED AGENTS OF THE LANDLORD HAVE THIS DAY RE-ENTERED THE PREMISES DEMISED BY THE SAID LEASE AND THE SAID LEASE IS THEREBY DETERMINED ABSOLUTLY”
Several points, I have phoned the bailiff 7 times and explained and also there is a cheque that has been ready at the office for the rent and in fact is £1200 cash there if required but they have just said they will get back to me.
The landlord hold £5000 as a deposit in a bank account under no scheme, I have received no notification by recorded or proof of delivery, however my personal post has still to be cleared, which ironically is at the office but there have been no recorded delivery items.
Can he do this? and can I gain peaceful re-entry?
The only other thing is as I believe he is doing this for an alternative motive in that he has the unit next door but that needs 3 phase and gas which on a new tenancy with a caterer he has let it too saying it has but it does not have either in the correct voltage or supply and will cost over £8k to have the road lifted just for the 3 phase.
Regards
Barry
By Ramin on January 30th, 2010
Hello…HELP NEEDED!
I have a tenant who has breached his Lease on many counts. He has turned part of the office into a residential unit and sub-let it. His Lease states that the unit is for office purposes only and no alterations can be made without written consent and strictly for office use only. He has applied for planning consent with the local authority – again in breach of lease- and they have refused. I am the lease holder and the freeholder has served me a Section 146 notice some time ago and I have done the same with the tenant. The local authority has now served an Enforcement Notice on all of us too.
I have been accepting his rent throughout this process as it’s been going on for over a year and a half. Plus Solicitors fees but nothing has been done. Now my tenant’s company has gone into liquidation and forfeiture is a clause under the Lease if such happens. I have served a fresh section 146…Am I able to go in and evict the tenant by myself when the Section 146 date passes and nothing has been done to remedy the breaches? I stand to lose a lot of money and can’t afford to.
Kind Regards
Ramin
By Lorraine Gordon on February 23rd, 2010
My landlord forfeit my shop lease meanwhile i was sick in hospital he had six months deposit for me and i owed him for six months 24th february 2010. romorrow i still have 13 years remainingon lease can i get any money from the landlord for remaining time or what else can i do to recover some money from this lease i have paid a lot of money for this shop lease please help
By Liz on April 15th, 2009
Hi,
Further to commments of last week answered by your collegue John. My partner has been in dispute with his landlord and has not paid rent (landlord’s case was struck out in the County court). Bailiff has changed locks and disputes that this is an illegal eviction quoting L’s common Law rights under Rent Act 1988 and also L’s right to his rent under Human Rights Act. Says as there is no signed lease, rules of forfeiture required by it do not exist.
Can you comment further.
Thanks
Liz