How do you as a landlord obtain forfeiture of a lease? Let’s look at landlord forfeiture of lease in detail and see your options for terminating a lease….
In summary, the grounds for landlord forfeiture of a lease, where a landlord can peaceably regain possession of his property because the tenant has breached the terms of the commercial lease, include:
- Non payment of the rent due under the terms of the lease
- The tenant’s insolvency (bankruptcy, enters liquidation
- Breach of material conditions in the lease
- Sub letting of the property
- Change of use of the property (for example from residential to commercial)
- Excessive noise or other inappropriate behaviour
- A forfeiture clause in the lease has been reached
- Alterations have been made to the property without consent
To obtain forfeiture of a lease, the process is different depending on whether it relates to non payment of rent or other reasons to forfeit the lease.
Let’s look at both methods for forfeiting the lease.
The Process For Forfeiting A Lease Due To Non Payment Of Rent Of Commercial Properties
When the forfeiture of the lease relates to non payment of rent, the process to forfeit is more straightforward than for breaches of terms or covenants within the lease:
- 14 or 21 days must have passed after the rent was due to be paid
- The landlord must not have accepted any payment plan to clear the arrears, issued legal proceedings or sent a bailiff to execute a Commercial Rent Arrears Recovery.
- The landlord effects peaceable re-entry of the property (force can be used to gain entry to the property, for example a locksmith opening the front door, but not to any people inside the property. For this reason, re-entry usually takes place when the property is empty).
When peaceable re-entry is obtained, the tenant may still apply for relief from forfeiture as detailed below.
The Process For Forfeiting A Lease For Other Breaches
If you are looking to forfeit a lease for other breaches of the terms or covenants in the lease, then the process is as follows:
- Serve a section 146 notice (from section 146 of the Law of Property Act 1925) which outlines the breaches under the terms of the lease and gives a reasonable period of time for the tenant to rectify them (if they can be rectified)).
- The notice should be served in duplicate with the tenant being asked to sign one copy to prove receipt of the notice.
- After the ‘reasonable period of time’ has passed, and if the tenant has taken no action to remedy the breach, the landlord can apply to the County Court for a possession order.
- The tenant will be served with the possession proceedings and again will have the opportunity to defend against them and claim relief from forfeiture. The tenant will have to explain why the breach has not been remedied, but nonetheless, it will delay the landlord obtaining possession and increase the legal costs (many of which will not be recoverable form the tenant).
- If the possession order is granted, the landlord can use bailiffs to reclaim possession of the property (and change the locks etc to secure it).
This process can also be followed for non payment of rent, but generally it is quicker, easier and cheaper to use peaceable re-entry as described above.
What To Do With The Tenants Property After Forfeiting A Lease?
If a landlord successfully forfeits a lease, they are responsible for them until they are returned to the tenant or other rightful owner.
Disposing of them could lead to compensation claims by the tenant.
Commercial Considerations For Not Forfeiting A Lease
Whilst the above processes allow a landlord to forfeit a lease, there may well be commercial considerations where they decide that it is not in their best interests to do so.
These might include:
- The costs involved in obtaining peaceable re-entry or a court order. Even peaceable -re-entry will involve locksmiths and most likely bailiffs, so this may deter a landlord from forfeiting a lease.
- The time taken to gain re-entry may be substantial. If a S146 notice is served, a reasonable time must pass before then applying to the court for possession of the property. This means that weeks or more likely months (if the tenant opposes the repossession), are going to pass before regaining control of the property.
- If until this one breach has occurred, the tenant has been a model tenant, the landlord may decided to allow the tenant time to rectify the breach before serving a S146 notice.
- Another consideration is whether the landlord believes that they will be able to let the property once again after obtaining possession.
Wrongful Forfeiture Of A Lease
If a landlord forfeits a lease and gains re-entry to the premises, the tenant can apply for an injunction allowing them to re-enter the premises if they claim that the breach which the landlord claimed had taken place had not taken place at all.
If they win their claim, they may be entitled to re-occupy the premises AND obtain compensation for any losses suffered.