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.
Hi Maria
Unless there is specific provision in the lease, it is not a requirement for a landlord of commercial premises to provide an inventory when exercising a right of forfeiture. If a tenant brings a claim in respect of any items that have gone missing, they need to prove to the court that it was more likely than not that the item was there immediately before the landlord retook possession.
Regards
John
AN INVENTORY WAS NOT PRODUCED WHEN FORFEITURE OCCURRED AND ITEMS WERE MISSING WHEN I WAS ALLOWED TO COLLECT THEM. IS IT A LEGAL OBLIGATION FOR THE LANDLORD TO PROVIDE AN INVENTORY.
Hi Ann
It appears that your query has not been responded to. In relation to the correct lease, the position is complex. If the 1992 lease fell within the provisions of Part II of the Landlord and Tenant Act 1954 (the Act) the tenancy will continue on the original terms unless it is terminated by notice under section 25 of the Act, or the new lease drafted in 2007 was entered into.
Turning to your query regarding the sums requested, the landlord is entitled to receive all costs of the forfeiture and all sums reserved as rent, which often includes insurance premiums.
Finally, your landlord should not have refused access to collect your goods unless there was a provision under the 1992 lease preventing this. You should make a wrtten request for access and threaten court action if the landlord refuses.
Regards
John
my landlord has re entered and changed locks for one quarter rent arrears. after 12 years this is the 1st missed rent(£937). I have offered to pay the rent owed, but he is asking for solicitors fees, baliff cost,back dated insurance etc. Can he ask for theses costs after forfeiting the lease? I did not sign the new lease which was drawn up in 2007 as I had disagreements in parts, which included the insurance premium which I refused to pay for the last 5 years,and he has not persued. The possesion notice refered to the previous lease of 1992? After the unreasonable actions of the landlord i no longer wish to trade from his premises although I need access to recover my equipment and personal belongings. Can he refuse this? Please advise.
Hi Richard
Rent reviews need to be undertaken in accordance with the terms of the lease and the landlord cannot unilaterally impose additional rent reviews outside of those set out in the lease. If the rent review has not been conducted in accordance with the terms of the lease the monies are not due and owing unless you have agreed to pay them. I would recommend that you do seek legal advice on the statutory demand as soon as possible as a statutory demand that is unpaid for 21 days could lead to bankruptcy/insolvency proceedings.
Regards
Owen
Hi i have a 5 year lease with a rent review in year three my landlord has in the first three years put up my rent I have disputed all the rent in august 2011 he tried a dissrees warrant but then while I was with bailiff he called it off give me a letter of apology and the one from his solicitor saying the will not pursue my rent until we have agreed on building work I have carried out for him he owes my three time more money than i owe him for rent. Today he served a stat demand for the full rent including the rent review and latter on tonight he tried a Forfeiture
Persistent problems with my tenant (of 6 years of commercial unit/ takeaway) regarding payment of rent (paid late, paid less or no payment). The tenant also did not pay the revised rent (only the original) when it was reviewed two years ago for nearly 18 months. I believe probably in view of the lease ending this year and the tenant wanting renewal, the tenant made the full quarterly payment (including revised rent) six months ago. Would this be considered his acceptance of rent review? As the tenancy is coming to an end, I sent section 25 notice to oppose renewal due to substantial rental and repair breaches. Following section 25 notice, the tenant paid the quarterly rent but this time minus the reviewed rent amount. Sent bailiffs for rent recovery but the tenant refused to pay by wrongly disputing previous rent arrears and that the reduced payment for this quarter was due to his disagreement with the rent review. He claims review was implemented unilaterally. Would full payment for last quarter not be considered his acceptance of rent review? Bailiffs have suggested forfeiture but I’m not sure where I stand or if the right of forfeiture has been waived due to tenant depositing rent (minus reviewed amount) in my account. If go ahead with forfeiture could I rent to another tenant with tenants equipment/ fittings. Please advise. Many thanks, Patel
Terrence
Your comment raises a number of issues in relation to the legality of the forfeiture, the remedy of distress and allowing you access to recover your belongings. These are complex areas of law upon which it is not possible to advise definitively without sight of the lease documents and full knowledge of the facts. I would certainly recommend that you seek legal advise on these issues.
i forgot to mention that he got the bailiffs in but he stopped the action as they thaught it was an illegal distress, also he has let third parties in since to remove goods most of witch are mine?
my lease expired on 8th april this year, no dicusion was entered into about a new lease, on the 21st of april he pou a forfieture of lease notice on the door, and changed the locks , but wont allow me access to remove my machines and tools, he keeps threatening to sell them to get his rent money, but has not, also he keeps threatening me with court action but wont do it?? i have not earned a penny since april and have lost two contracts, , also im about to have my home repossesed, as a direct result of his actions but he says he is using terms of the lease, can he do this afer a forfieture? i owe him £3.500.oo , yours hopefully ,, ps/ i have a free workshop in the pipeline, so could have paid the arrears off by now,