At Lewis Nedas, we are property law experts. From drafting and negotiating leases, to conducting litigation when a landlord and tenant relationship breaks down, our team is on hand to assist you. We have particular expertise when dealing with forfeiture of a commercial lease.
Below we offer guidance on the key legal issues which arise when forfeiting a lease as a commercial landlord. It is important to note that this is a complex area of law and you ought to seek legal advice to help you understand the procedures involved. Landlords must be careful to ensure that they follow the correct processes. If they do not, they can leave themselves exposed to challenge and may even be committing a criminal offence.
Our team are experts in this area of law and are familiar with the procedure involved. We are here to support you in this process, ensuring that the correct procedures are complied with. While the discussion below focuses on commercial leases, if you have any questions relating to forfeiture, in a commercial or residential setting, please do not hesitate to contact a member of our team today. We are always here to help.
Key legal issues
Where a commercial tenant is in breach of the terms of a lease, a landlord may have the right to terminate the lease – known as forfeiture. There should be a forfeiture term in the lease which will deal with the scenarios in which a landlord has the right to forfeiture. This underlines the importance of careful drafting of leases. Their terms can be vital when a relationship breaks down.
Generally speaking, if the tenant is in breach of a covenant under the lease then the landlord has the right to forfeit – although the landlord must always carefully follow the relevant procedures.
For example, the right to forfeiture will arise where there is non-payment of rent, although generally speaking the landlord can only forfeit after a certain period of time – e.g. 21 days – in the event of rent not being paid. The time period will be set out in the lease.
There are legislative provisions which govern the forfeiture process. If in a commercial lease a covenant is breached, then a section 146 notice must be served on the tenant. It is important to note that the section 146 procedure does not apply in a case involving non-payment of rent where a slightly different procedure is involved. However, as outlined above, there will usually be a period of time following non-payment of rent during which the landlord cannot forfeit.
A section 146 notice will explain the covenant that has been breached; tell the tenant what action they must take to cure the breach; and set out any right to compensation arising from the breach. If the tenant does not fix the breach or pay the compensation within a reasonable time then the landlord can continue with the forfeiture of the lease.
In the event that the issue causing forfeiture relates to the tenant’s repairing obligations, the landlord must also comply with the terms of the Leasehold Property Repairs Act 1938. This places certain restrictions on seeking forfeiture. A landlord cannot seek forfeiture immediately if the lease is for seven or more years and there are three or more years remaining on the lease. One important point to note is that the tenant has the right to serve a counter notice, which ultimately can require the landlord to go through the courts in order to proceed.
It is important before proceeding with any forfeiture that a commercial landlord seeks legal advice. Generally, there are two main options available in effecting forfeiture and a landlord must carefully consider their options.
The two main routes of effecting forfeiture are peaceable re-entry to the premises or seeking court proceedings for eviction.
Peaceable re-entry is often seen by landlords as an efficient and simple solution which avoids the need to go to court. However there are many pitfalls in exercising peaceable re-entry and the landlord could end up in a problematic situation. Peaceable re-entry generally involves changing the locks. The landlord must exercise extreme care to make sure that there are no persons or property at the premises. For example, changing the locks is illegal if there is someone present on the property who objects to the forfeiture.
Seeking court proceedings for eviction may be more time consuming but can also be a safer option for landlords. In any case, our expert solicitors will be able to advise you on the best course of action.
Get in touch
Our team at Lewis Nedas understand how difficult it is when a relationship between a landlord and tenant breaks down. It can often create a very tense situation and can become highly contentious. It is important that you seek legal advice at an early stage, in order to help you understand the options available. As a landlord, you must proceed with extreme caution to ensure that you preserve your rights and do not hinder the forfeiture process. While this can be challenging, our team are here to manage the day to day administration of the process. We have an eye for detail and are meticulous in our approach.
At Lewis Nedas, our team of Property Solicitors have broad experience in all areas of commercial and residential property law. To speak with one of our Property Lawyers, please contact us on 020 3811 3589 or complete our online enquiry form.