Forfeiting a lease for non-payment of rent
Many landlords are not aware of the steps, and potential pitfalls, of forfeiting a lease due to non-payment of rent by a tenant. This guide aims to provide the key steps of forfeiting a lease and some practical considerations that a landlord should bear in mind.
- Carefully consider the wording of the relevant terms of the lease relating to its forfeiture for non-payment of rent. It is vital that you act in accordance with those terms.
- It is easy for a landlord to waive their right to rely upon the non-payment of rent to forfeit the lease. For example, by simply chasing payment of rent arrears a landlord is deemed to have waived their right to forfeit the lease based on those arrears.
- Consider whether or not relief from forfeiture will be granted to the tenant. A landlord should bear in mind that if a tenant is in a position to repay all outstanding arrears, interest and costs, a court is likely to grant relief from forfeiture. In those circumstances, it might be better to consider an alternative enforcement method.
- A landlord should be aware of the fact that a tenant of a forfeited lease has 6 months following the forfeiture in order to apply for the relief. Therefore, a lease to a new tenant should not be granted during that period, unless it factors in the possibility of the premises being returned to the previous tenant, although, commercially, this is fairly unrealistic. Alternatively, if a landlord is certain that the tenant cannot pay the outstanding debt they could consider granting a new lease to a new tenant.
- The landlord must take action that shows an intention to forfeit the lease, which must be unequivocal. The ways in which this is achieved are by either peaceable re-entry (re-entering the premises, without notice, and changing the locks) or the issue of possession/forfeiture proceedings (requesting a court order granting possession/forfeiture).
- Following the forfeiture, a landlord should communicate to the tenant that this has occurred and arrange for their possessions to be returned. Notices also need to be issued.
- It is important to ensure that forfeiture is correctly undertaken because, if it is not, a tenant may issue a claim for wrongful forfeiture, which may result in the tenant being allowed to re-enter the premises and the landlord being ordered to pay damages and costs.
The above serves as a brief overview of the key steps and considerations to forfeiting a commercial lease for non-payment of rent. However, this is a very technical area that can easily be mishandled, which may result in a defaulting tenant being let off the hook and able to remain in a premises. We, therefore, strongly recommend that a landlord seeks timely legal advice prior to taking any such steps.
If you would like assistance in this regard, please contact Carl Arreghini by email firstname.lastname@example.org or call 01202 525333.