Ben Jones from our property disputes team explains forfeiture and how it can be applied to commercial premises.

What is forfeiture?

Where a tenant is in breach of an obligation contained within a lease the landlord can exercise their right to bring the lease to an end. Ending the lease in this way is known as forfeiture.
Forfeiture can be initiated by the landlord by either physically taking possession of the property by peaceable re-entry or by issuing forfeiture proceedings through the Courts. Before taking either step the landlord must ensure they have served a valid s.146 Law of Property Act 1925 notice if the breach is for something other than the payment of rent. The notice should specify the specific breaches and the tenant has failed to remedy those breaches.

I’m a tenant what can I do?

If you are a tenant and your landlord forfeits your lease then you can apply for relief from forfeiture. Relief from forfeiture is a discretionary remedy which gives the Courts powers to put the landlord and tenant back into the position they would have been in if forfeiture had not happened (i.e. the tenant remains in the property subject to terms of the lease).

How does it work?

The Court has wide discretion to grant relief but it will generally need to be satisfied that the tenant has or will remedy the breach and it must be convinced the tenant will perform its obligations moving forward. In exercising its discretion the Court will consider a number of factors.

The Court may also impose any conditions it deems fit and will likely include payment of the landlord’s costs, expenses or damages.

When is it available?

Relief is available as part of the landlord’s forfeiture proceedings or the tenant can bring their own proceedings if the landlord has peaceably re-entered the property. Where forfeiture proceedings are issued for rent arrears a tenant has an automatic relief from forfeiture if they pay all rent arrears, interest and costs before an order for possession is granted.

A tenant can apply for relief from forfeiture at any point during proceedings and if forfeiture is by re-entry at any time during which the Court still considers it would be equitable to grant relief. It should however be noted that where the landlord has forfeited a lease by re-entry for rent arrears a tenant must make an application for relief within 6 months.

Ultimately if you are a tenant of a forfeited lease it is important both commercially and legally to seek advice and to act swiftly if seeking relief from forfeiture. Equally, if you are a landlord looking to forfeit a lease, it is important to ensure that the correct steps are taking to avoid any counterclaim(s) by the tenant and advice should be taken if there is any uncertainty.