If your landlord forfeits your lease you need to seek urgent advice to explore whether the landlord had the right to forfeit. If it did, you may be able to remedy the situation and be allowed back into the premises. If it did not have the right to forfeit, you will be allowed to return, and you may have a claim for damages.
Most commercial leases have an express forfeiture clause which applies if the tenant has breached the express obligations (covenants) in the lease.
If there is no clause in the lease, the landlord does not have a right to forfeit.
Commonly landlords will forfeit for non-payment of rent. For this type of breach, a landlord can proceed immediately with either forfeiture by peaceable re-entry or applying to Court to forfeit the lease and obtain an order for possession.
In the case of breaches other than non-payment of rent, there is a statutory process landlords must follow before they can forfeit. This involves the landlord serving a Section 146 Notice on the tenant giving them a reasonable period of time to remedy the breach, failing which the landlord can proceed to apply to Court for possession.
If permitted by the lease, a landlord can forfeit by peaceable re-entry for non-payment of rent only. This method involves a landlord or certified agent physically re-entering the premises and changing the locks.
Landlords may also apply to Court to forfeit a lease. The service of proceedings on the tenant demonstrates the landlord’s intention to forfeit the lease. However, the lease terminates only once the Court makes the order for possession. If a landlord has a Court Order to forfeit, it is rare that forfeiture could be deemed unlawful.
A landlord cannot enforce a breach of the tenant’s obligations committed after service of the proceedings, meaning a landlord is precluded from bringing further claims against the tenant.
Following forfeiture, the tenant’s possessions usually remain in the premises. A landlord becomes an ’involuntary bailee’ which means that they are responsible for ensuring there is no damage to tenant possessions.
The landlord is required to give tenants an opportunity to collect their possessions, failing which the landlord may proceed to sell the possessions.
The landlord is required to account to the tenant for the sale proceeds, less any costs of sale.
Tenants should know that even if forfeiture is lawful, they have a right to apply to Court for relief from forfeiture, the effect of which is for the lease to be reinstated by the Court. Relief can only be granted by the Court.
Where forfeiture was carried out by peaceable re-entry, the tenant has 6 months from the date of peaceable re-entry to apply to Court for relief.
Tenants can also apply for relief by way of a counterclaim to a claim for possession by a landlord.
In most cases of relief from forfeiture where the breach is non-payment of rent, the Court will grant relief if the arrears, the landlord’s costs of forfeiting and any interest accruing on the arrears are paid. Accordingly, if the tenant is able to show they are ready, willing and able to pay those costs, a Court is likely to grant relief.
A landlord is at risk of a damages claim if it unlawfully carries out forfeiture by peaceable re-entry. This may arise if the landlord does not have a right to forfeit, or if they have waived their right to forfeit.
As a tenant, if your landlord forfeits by peaceable re-entry, this could have negative consequences for your business, as you will not physically or legally be able to run your business from the premises. Such disruption may affect staff, reputation and your profits.
Even if a landlord has a right to forfeit, some comfort for tenants is that a landlord may waive this right by actions or communications which acknowledge the lease as continuing. This may include your landlord chasing you for rent, sending invoices, or even discussing your obligations in the lease with you.
Isabella Mason is a Solicitor at Taylor Walton Solicitors www.taylorwalton.co.uk
