Forfeiture is a powerful landlord’s remedy available when a tenant is in breach of their lease and which may allow the landlord to bring the tenant’s lease to a premature end. This article is a brief consideration of some of the key issues in relation to the forfeiture of residential premises although the Law Commission is currently considering an overhaul of the forfeiture process so the procedure is likely to change.
When considering forfeiture it is vital to make the distinction between commercial and residential premises as the rules and procedures applicable differ. Broadly speaking the rules in relation to commercial premises are less favourable to the tenant. This article deals with residential forfeiture.
Look carefully at the lease
If the tenant is in breach of their lease, and the landlord is considering forfeiture, the starting point is to look carefully at the lease of the premises. It is only possible to forfeit if the lease contains an appropriate forfeiture clause. These clauses are sometimes described as rights of ‘re-entry’ and may contain requirements to be fulfilled before forfeiture can take place.
If there is a forfeiture clause in the lease, the appropriate steps to forfeit may then be followed. They will vary depending on the type of breach committed by the tenant. Where the tenant’s breach is for anything other than non payment of rent, legislation requires that the landlord first serves a formal notice on the tenant stating the breach, what needs to be done to put it right (if possible) and whether compensation is payable.
Importantly, unless the tenant admits their breach, the landlord cannot validly serve the notice before first obtaining a ruling from a court or the Leasehold Valuation Tribunal that there is a breach. In the case of unpaid service charges, the Leasehold Valuation Tribunal will decide not only whether the charges are payable but whether they are reasonable.
Only then, after service of the notice, if the tenant fails to remedy the breach within a reasonable time, will the landlord be able to issue court proceedings for possession of the property. In the case of rent arrears provided they are over a certain threshold the landlord may begin proceedings for forfeiture, possession and recovery of the arrears as a debt.
The courts are reluctant to deprive tenants of a valuable lease, and provided a tenant is able to put right the breach and pay the landlord’s reasonable costs then the tenant will usually be entitled to the reinstatement of their lease. Even if the breach cannot be put right by the tenant the court has a wide discretion that it can exercise in the tenant’s favour. Indeed if the breach is non payment of rent, the tenant has a statutory entitlement to relief from forfeiture if they simply pay the arrears as well as any interest owing and fixed costs before the first court hearing.
Waive their right
Landlords must be careful that they do not inadvertently waive their right to forfeit if it is based on a breach of certain once-and-for-all types of covenant such as a prohibition on alteration or subletting. All that is required to waive the right is for the landlord to continue to treat the lease as continuing after he has knowledge of the tenant’s breach, for example, by continuing to demand or accept rent. Fortunately for a landlord it is not possible to waive a breach for the non payment of rent?
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