Commercial lease forfeiture solicitors

It’s a big and important decision for any commercial landlord as to whether to forfeit a lease and retake possession. This is the case even where the tenant has stopped paying rent or has breached the lease terms in another very significant way.

Considerations can include how easy it may be to get another suitable tenant into the property, liability for business rates and the security risk of having an unoccupied property.

Forfeiture inevitably involves additional cost and if the tenant is already in financial difficulties, which is common, it may not be the best solution. The tenant may be able to sub-let or assign the lease or may be willing to agree to terminate the lease, which is called lease surrender. All options should be considered.

At Streathers, we are highly experienced commercial property lawyers. We can advise you on the legal issues and procedure but also the practical and strategic considerations if you are considering forfeiture.

Forfeiture of lease based on non-payment of rent

As forfeiture constitutes termination of the lease contract, as with other types of contract, breach of the lease by the tenant does not necessarily give the Landlord the right to terminate the contract. English law general contract principles establish that only fundamental breaches of contract generally give rise to the right to terminate. Clearly, non-payment of rent is fundamental to the contract and so this is by far the most common and safe grounds for forfeiture.

If you are a Landlord considering what action you can and should take for breaches of the lease by the tenant other than unpaid rent, such as, for example, the tenant is not complying with the permitted use or has made alterations to the property without your consent, you should be cautious and get legal advice. If you seek to forfeit without due process and the legal right to do so, you could in fact end up in breach of the lease yourself and face an expensive claim by your tenant.

Section 146 Notice

If you are a Landlord considering forfeiture it is essential you follow the correct process. This involves serving a notice called a section 146 notice on your tenant and giving the tenant the opportunity to remedy the breach of lease before you terminate. The notice needs to clearly state the details of the breach and stipulate a time period for the tenant to rectify the breach.

Have you waived the breach of lease?

It’s quite common for commercial tenants to be late in paying rent or to make part payments. These situations create hidden legal dangers for Landlords. If as Landlord you have simply accepted late or part payments, you may find that if you threaten forfeiture you face a counter argument that you have waived payment breaches by the tenant and can’t forfeit. This can generally be avoided if a Landlord has expressly stated that any flexibility about timing or amount can only happen if the tenant agrees that this will not later constitute waiver of the contract terms. So, if you have accepted rent late or only in part without express written protection, you will need to proceed cautiously if you later think you have grounds to forfeit the lease. 

Relief from forfeiture

In situations where the Landlord has acted hastily, not complied with process or where legally there are reasons why forfeiture should not have happened, a tenant may apply to court for a relief from forfeiture order. To have a chance of succeeding, the tenant must apply quickly.

We provide specialist, cost effective legal advice on all aspects of lease forfeiture and commercial lease disputes. Please do contact our commercial property solicitors for a discussion. We have 5 offices spread conveniently around London.