• Commercial property
  • February 25, 2022

How Commercial Lease Tenants Can Protect Themselves From Forfeiture

The remedy of forfeiture dates back to 1066. The breaches conditions were defined that could lead to forfeiture of the land. 

Over 1,000 years later, the law of forfeiture remains essentially the same– a commercial property tenant rents their premises from a landlord subject to various covenants, the breach of which can lead to forfeiture of the lease. As you would expect, justice has developed and tenants, acting on the advice and representation of their Commercial Property Solicitor, can apply to the Courts for relief from forfeiture.  

In this article, we explain what forfeiture is, as well as the rights of a commercial tenant in a forfeiture action.

Breaking News – The UK Government has prohibited landlords from exercising the right of forfeiture for non-payment of rent related to the Coronavirus pandemic until 25 March 2022.

What is forfeiture?

Forfeiture, or re-entry as it is sometimes known, is the landlord’s right to take back possession of their property. This can occur should the tenant breach a covenant (such as non-payment of rent) or on the occurrence of a trigger event documented in the lease, for example, the tenant becomes insolvent.  

Because of the draconian nature of forfeiture, extremely strict laws surround its performance. A landlord cannot retract an act of forfeiture; therefore, you can assume that they have taken legal advice well in advance. As soon as you realise that your landlord is about to or has forfeited your commercial lease, talk to your commercial property solicitor about the best action to take in response.

What is the difference between peaceable re-entry and issuing forfeiture proceedings?

Forfeiture can be exercised through peaceable re-entry or through a Court application.

  • Peaceable re-entry

Peaceable re-entry means just that. If the landlord breaks down the door or attacks you verbally or physically, this is definitely not peaceable. Most cases of peaceable re-entry occur after the tenant has abandoned the premises or at night. The re-entry and repossession must be unambiguous to be effective, the most common method of achieving this is to change the locks. 

  • Court proceedings

Although issuing Court proceedings is a more expensive and slower process than peaceable re-entry the risks are significantly less. Therefore, most landlords opt for this route. Court proceedings are commenced by the landlord issuing a Section 146 Notice 

If Court proceedings are issued the lease will not terminate until a Judge makes an order stating the landlord has possession of the premises. The period between service of the proceedings and when the Court makes its judgment is known as the 'twilight period'.  During the twilight period, the landlord cannot demand rent from you; however, they can claim damages for trespass. Because you have not elected for the tenancy to end during the twilight period, you are still entitled to enforce covenants applicable to the landlord, for example, any duty to repair.

Can I challenge forfeiture?

You can apply to the Court for relief from forfeiture.  If successful, the Court will make the necessary orders to put you and the landlord back into the same position you would have been had no forfeiture occurred.  

Although the Courts have shied away from developing a test for relief from forfeiture, it will normally be granted if:

  • you have remedied the breach or pay compensation to the landlord for breaches of covenants that cannot be remedied
  • you persuade the Court that you will perform your obligations under the lease in the future

Because relief from forfeiture is an equitable remedy, the Court will consider your conduct when deciding whether to grant relief.  Factors it will review include:

  • whether you deliberately committed a breach of covenant/s
  • whether the damage suffered by the landlord is proportionate to the advantage it will obtain or the disadvantage you will endure if the Court does not grant relief
  • will your breach cause the landlord lasting damage?
  • your personal qualifications and financial position

Conditions will usually be attached to relief from forfeiture, and these could include paying the landlord’s legal costs.

If forfeiture by proceedings relates to non-payment of rent, the County Court can grant automatic relief provided you pay all arrears, interest, and costs of the action into the Court or to the landlord five days before the first hearing date of the landlord's proceedings. A second opportunity to rectify rent arrears will be granted after the first hearing.  Should peaceable re-entry be used by the landlord to take possession, you may apply for relief up to six months after the re-entry.

In summary

Receiving a Section 146 Notice or finding yourself locked out of your commercial property due to forfeiture is extremely distressing. 

Our commercial property lawyers can provide you with practical, business-friendly, expert advice on applying for relief from forfeiture. We can also quickly inform you if your landlord has waived their right to forfeiture by committing an act that confirms the tenancy still exists (for example accepting a rent payment).

If you are concerned that you may have breached a covenant in your commercial lease or you have received a section 146 Notice, you can book a free consultation with one of our commercial property lawyers and get the legal advice you need.

In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.

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