If a landlord wishes to protect their property interests due to a tenant failing to fulfil their obligations under a lease, they may seek forfeiture of the premises through application to a court. The effect of forfeiture is to terminate the lease and have the possession of the property returned to the landlord. It is imperative to note that a valid forfeiture clause must exist in the lease agreement.
There are protections available to tenants who are subject to forfeiture action, with distinctions between residential and commercial premises. Furthermore, a landlord must take care to adhere to proper procedure when exercising their rights, or else leave themselves vulnerable to legal claims from their tenant.
Grounds for forfeiture
Before forfeiture proceedings commence, a distinction must be made between breaches that are remediable or not. Beyond the requirement to pay rent, a landlord will almost always include covenants in their lease agreements. A covenant will oblige a tenant to act or refrain from acting in a certain way, such as an obligation to repair or insure the premises, or restrict the use of the premises.
A breach of a covenant to repair, use or against sharing possession of the premises is not usually regarded as irremediable. By contrast, breach of a covenant against subleasing or assignation of the lease, or illegal use of the premises, is commonly considered irremediable.
If the breach is remediable, for most breaches, aside from non-payment of rent, the landlord must serve a Section 146 Notice upon the tenant. The Notice is required to:
- explain the nature of the breach;
- state the remedial action the tenant must take; and
- state entitlement to damages for the breach.
All tenants must be afforded a reasonable time to remedy the breach where it is possible to do so. Even if the breach is irremediable, a court may award a relief period to the tenant prior to forfeiture.
Commercial property and forfeiture
Upon expiry of a reasonable period of time, with commercial properties the landlord is entitled to either (1) peaceably re-enter the premises or (2) seek court proceedings for eviction.
Peaceable re-entry is a cost effective solution where the landlord enters the premises (force is permissible), changes the locks and leaves physical notice that the lease has been terminated on that date. However, the landlord must be diligent in ensuring there are no persons or property remaining on the premises. It is illegal for a landlord to access and change the locks on a premises if there is someone present who objects to the forfeiture. If moveable property has been left by the tenant, the landlord may be legally responsible for its safekeeping until the tenant can recover possession.
Residential property and forfeiture
For residential property, a landlord cannot use peaceably re-entry as a means of recovering possession unless it is clear the tenant has vacated the premises and does not intend to return. In almost all cases, it is not advisable to use this method for residential property, as a landlord may leave themselves vulnerable to claims for trespass. Instead, a landlord will recover possession of residential property through court proceedings.
Specific grounds: repairs
Where repairs are concerned, under the Leasehold Property Repairs Act 1938, a landlord cannot seek immediate forfeiture where the lease concerned is for seven or more years and there are three or more years remaining on the lease. At least one month’s notice must be provided prior to forfeiture. The tenant must also be notified of their right to counter notice. If served within 28 days, a counter notice will prevent the landlord from re-entering the premises and force them to resort to court action.
Specific grounds: non-payment of rent
Where non-payment of rent is concerned, the landlord is not required to provide notice before seeking forfeiture proceedings, including peaceable re-entry. All that is required is that the rent becomes past due. However, a lease agreement will usually provide between 14 and 21 days grace period for a tenant to make up in rent arrears before proceedings are commenced.
Assured shorthold tenancies and non-payment of rent
With regards assured shorthold tenancies, and non-payment of rent is concerned, a landlord may serve a Section 8 Notice upon the tenant. Typically, 14 days’ notice will be afforded to the tenant before eviction occurs.
Relief from forfeiture
A successful relief from forfeiture will result in the lease being reinstated and the parties returned to the position they were in prior to the alleged breach. Relief can only be awarded by a court, and can be applied for before the relevant County Court or the High Court. Relief can be awarded on certain grounds, such as non-payment of rent, if the tenant pays all sums due prior to a court hearing regarding an order for possession.
Depending on the nature of the breach and the time elapsed since any court order for possession (usually six months) the courts have varied discretion whether or not to award relief.
Beyond forfeiture and termination of the lease, a landlord may still be entitled to claim money for repairs from the former tenant under the doctrine of dilapidations.
Fixtures and property
Any fixtures installed by the tenant that remain on the premises following forfeiture will become the property of the landlord, subject to any relief granted by a court. By contrast, any chattels unaffixed to the premises will continue to belong to the tenant. After forfeiture is granted, the landlord becomes legal custodian of the property, and must prevent any intentional or reckless damage to it.
A landlord must take care not to expressly or impliedly waive their right to seek forfeiture. By example, a landlord may lose their right to seek forfeiture for non-payment of rent by subsequently accepting rent checks. A distinction should be made between breaches that are actionable on the basis of one incident i.e. non-payment of rent and those of a continuing nature, such as obligations for repair. With the latter, for as long as the tenant has not carried our repairs, the landlord will unlikely be considered to have waived his right to seek forfeiture.
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Depending on the type of property leased, and the term of the lease agreement that has been breached, a landlord is entitled to self and court-enforced forfeiture in order to protect their property interests. If these procedures are improperly carried out, however, a landlord can leave themselves vulnerable to claims from the tenant.
At Lewis Nedas, our team of Property Litigation Solicitors have broad experience in both commercial and residential property litigation. We have successfully advised clients with highly complex and multi-faceted cases. To speak with one of our Property Lawyers, please contact us on 020 7387 2032 or complete our online enquiry form.