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.
A friend of mine is a landlord of a commercial shop. A Law Society Lease was granted to the tenant and a Rent Deposit Deed was taken for three months advance rent.
The tenant gave the shop to a subtenant. Who my friend was going to grant an assignment of the lease to through solicitors, which the transaction had begun but is not completed. The landlord had been accepting the rent from the sub-tenant for the last three years.
The Rent Deposit Deed held from the main tenant was not transferred to the sub-tenant. The sub-tenant has returned the shop key and left. The shop is locked and vacant.
The main tenaant is ringing the landlord and requesting that the Rent Deposit Deed funds are returned to him.
The landlord wants to forfiet the lease, if that is the correct procedure to follow and run his own business from the shop.
What is the best course of action to take at this point.
The sub-tenant has not paid one month’s rent. There are repairs to be done. The sub-tenant has also taken the boiler when leaving.
Hi Zakariah,
Owen is on leave this week so I have picked up your query in his absence.
I am presuming that your original lease had a forfeiture clause allowing the landlord to re-enter the premises if rent is a given number of days late. I am also assuming that your lease had the benefit of the protection of Part II of the Landlord and Tenant Act 1954 and as such it continued on the same terms after the original 12 month period ended.
From what you have said your landlord is acting totally unlawfully. When he forced entry into your property and changed the locks, he terminated the lease through the forfeiture provisions referred to above. After that point he had absolutely no power to seize or withhold your goods and is acting unlawfully in refusing to allow you to collect them. A landlord only has the right to seize a tenant’s goods for non-payment of rent during an existing tenancy. In your case the tenancy in all likelihood ended as soon as the landlord re-entered the premises.
Further, the minute a landlord terminates a lease by forfeiture he can no longer charge for any rent that falls due after the day he terminated the lease. Once a lease is terminated the tenant is only liable for the rent that fell due to be paid before the date of forfeiture.
Your legal remedy will be to obtain and an injunction to recover your goods, but you must act swiftly. I strongly recommend you speak to your solicitor to start matters moving as soon as possible.
Best of luck.
Regards
John
sorry I forgot to mention the original lease I signed for 12 mths has expired and I think I am on a periodic tenancy now as I did not sign a new lease.
Need some factual advice urgently. The Solicitors talk to seem unclear ? I am a Tenant of just under 2 years for a commercial unit.I got into 1 month arrears for rent £800. The landlord forced entry one night after work and changed all locks and I cannot get in to my rented unit. The landlord claims he has seized all property in the unit my work tools as I am car mechanic and customers cars. He says he will sell them to recoup costs he is also charging me rent and my debt is increasing.
He has accepted part payments of rent from me but as I cannot get into the unit to work I feed him cash rent payments of £400 pounds a month and this has been going on for 5 months he keeps on adding further rent for every month. he has totted up £5000 rent arrears for 5 months odd that he has locked me out of my unit. My customers are demanding their cars back but he refuses to give them back. The police say its a civil matter. what can I do ? any genuine good advice would be appreciated. The landlord changed the locks himself he did not instruct baliffs to change locks.
Thank you for your message.
The lease between you and your landlord created a legal obligation on you to pay rents and perform the lease covenants for the contractual 10-year term. If the business no longer provides you with sufficient funds to pay the rents and perform the other lease obligations you will need to consider whether you can realistically carry on as tenant of the pub. If you were to consent to possession by the landlord, this action will at least limit the costs you are liable to pay to the landlord as the landlord cannot claim for future rents – the landlord will only have a claim for rents up to the point of forfeiture.
I would suggest that for a detailed legal advice on your options you consult a local lawyer of the Citizens Advice Bureau.
Regards
Owen
Looking for urgent advice! I am the lessee of a public house and have over 3 years left to run on my 10 year lease. During July I asked my Pubco for urgent help to keep my pub trading through extremely difficult times and am still awaiting the outcome of our meetings and correspondence, no answer has been given. My rent and trade account are in arrears though I hoped we could work something out, I have been here for 11 years. Meanwhile Pubco have served a S146 notice and have now applied to the Court for possession on the grounds of forfeiture. I do not have funds to pay for legal representation and so will have to represent myself at the hearing. Is there any help or advice available in these circumstances? Many thanks.
What a tremendous site for both landlords and tenants. I am a lanlord and have a tenant who has defaulted on a commercial lease approx half way through it’s term, he left the property owing a full qtrs rent £4000 and approx £5000 of damge to windows and interior fittings. I have issued him with a default of lease notice which has now expired and now I want to take to court for the oustanding rent and the expenses I’ve incurred to put the property back in to a rentable condition. My question is this, if I take him to court and win and he still doesn’t pay what can I do then?? Or am I just left with a legal bill and no of enforcing payment from him?? Many thanks for your help.
Good Afternoon
We are a sub tennant in a commercial property and have recently defaulted in paying our rent.
A couple of weeks ago we turned up to the property to find out the locks had been changed.
We struck a deal with the property owner stating as long as we pay a set amount each week we can have the keys back.
We have now done the deal but have now received a bill from our immediate landlord for £750.00 for bailiffs fees and a locksmith fee.
We did not have any warning to say they were coming is there fee lawful.
Following on from my previous query, I have written to the landlord and his solicitor seeking to gain a peaceful and less. mostly resolve to the peaceable re-entry.
The solicitor is demanding costs for new door etc.,, but is also seeking costs for preparing a Schedule of delapidation 3 years ago, another schedule (which I argue was a waste of time as its purely an inventory of a building site -as the builders absconded mid job) as well as their fees and other quantified amounts and my preparation of a deed to negotiate. These costs are several thousands (versus the £800 insurance which was queried by us and paid as soon as able) these costs would easily eat up 25% of the finance we’ve managed to raise to complete the works on the project and place the success of the completion in serious jeopardy.
How would you advise we best proceed to gain back our building (which we owned on a 999 year lease) quickly and cost effectively?…(the solicitor says they will “robustly oppose any attempt to fight their terms of re-entry).
Your best advice would be greatly appreciated.
Our landlord was advised of a meeting of creditors in order for our company to enter into a CVA. On the Friday before the meeting (to be held at 10am Monday) after we had left the office, the Landlord placed a forfeiture notice on our door and changed the locks. Our CVA creditors meeting had to be held in the stairwell of the building and granted. The landlord is not allowing us access to remove our files and contents. We have requested 2 days to dismantle & move everything, however the solicitor has come back to us twice 1 day before the day they say we can go in. What can we do?