What Is Forfeiture Of Lease and When Can It Be Used?
Forfeiture of Lease Meaning |
Forfeiture of lease is a legal process where a landlord can terminate a lease agreement due to a tenant’s breach of contract. This usually happens when the tenant fails to fulfill their obligations, such as not paying rent on time or violating specific terms of the lease.
The ability to forfeit enables a landlord to re-enter their property following a breach by the tenant, and by doing so, terminate the lease. Depending upon the reason for forfeiture, termination can take place with immediate effect, or following a period of notice. The landlord can enter their premises in the absence of their tenant by peaceable possession. The right must be conferred expressly: there must be a ‘forfeiture clause’ or a ‘proviso for re-entry. It can be contrasted with a break clause exercisable by a landlord, which also confers a unilateral right to terminate, but not upon some default of the tenant (such as a right of forfeiture). The difference is that it is only where the landlord is exercising a right to forfeit the lease that the tenant can apply for relief against forfeiture.
The tenant’s right to seek relief from forfeiture, or the right to petition the court for an order reinstating the lease, is a counter to landlord forfeiture of the lease. The general rule is that if the tenant remedies his breach of covenant, such as by paying any arrears, the court is more likely to grant relief.
In order to be allowed to forfeit a lease, a landlord must first show the legal basis for doing so. The most usual method is to rely on a clause in the lease that gives the landlord the power to forfeit in particular circumstances.
It’s also worth mentioning that in some cases, even if there’s no specific condition in the lease, a landlord can exercise a right to forfeit. The entitlement arises automatically if the tenant has breached a lease condition (i.e. a fundamental clause at the heart of the contract). However, the right should be used with prudence and in consultation with legal counsel to determine if the tenant’s breach is truly at the heart of the contract. The risk of attempting to forfeit a lease without an express right to do so is that the landlord may be held liable. As a result, legal counsel should be obtained as soon as a violation arises.
Uses Of Forfeiture of Lease
If you can’t do Commercial Rent Arrears Recovery (CRAR) because the Bailiff (Certified Enforcement Agent) can’t get inside the property, Forfeiture of Lease in property law is a good option. It can also be utilised in situations where there are few or no commodities to seize, or where all of the goods on the site are owned by third parties.
Currently, a landlord can evict a tenant for a variety of reasons, depending on the lease’s terms. The most common is failure to pay rent. Other considerations include:
- When the tenant violates the tenancy agreement.
- Insolvency occurs when a tenant becomes bankrupt, enters liquidation, or enters into an insolvency arrangement such as administration or receiver.
- Use of the property in an unsuitable manner.
- Without permission, a change of use is made.
- Subletting is a term that refers to the practice of renting out
- Excessive noise or bad behaviour.
For these breaches, the landlord can sue for damages, but he may also want to reclaim ownership of his property.
If the tenancy has a “forfeiture clause,” the landlord can only take action to forfeit the tenancy.
Following a breach, the forfeiture clause authorises the landlord’s Bailiff (Certified Enforcement Agent) to “re-enter” the property.
The forfeiture clause in a lease would usually include something like “if the rent is not paid for 21 days, the landlord may enter and forfeit the lease peacefully.”
The landlord may or may not have to serve the required notice under Section 146 of the Law of Property Act 1925, depending on the nature of the infraction.
Forfeiture Of Lease In Property Law | Non-payment Of Rent
If the breach of the lease is non-payment of rent and the landlord has done nothing to waive the breach, the landlord can normally forfeit the lease without notice.
Non-payment is usually classified as such a serious problem that the landlord refuses to renew the lease.
Nothing spoken or done by the landlord should be construed as a waiver of their right to terminate the lease.
If the landlord, his Bailiff (Certified Enforcement Agent), or management agent does anything to acknowledge that the lease is still in effect, such as:
- sending the bailiff to execute a CRAR procedure
- agree on an instalment plan
- issue legal proceedings
If this occurs, the landlord should wait until the next month’s or quarter’s rent is due before forfeiting that month’s or quarter’s rent.
How to Effect Landlord Forfeiture of Lease?
In one of two ways, a landlord can re-enter the property and terminate the lease. This will be accomplished either by a peaceful re-entry or through legal actions.
Peaceable Re-Entry
By instructing a Bailiff/Certified Enforcement Agent, such as Shergroup, to physically re-enter the property.
The re-entry must be without incident. The landlord and the Bailiff (Certified Enforcement Agent) may be charged with a crime if violence is threatened or used. Section 6 of the Criminal Law Act of 1977 governs this situation.
You can only take Peaceable Possession by using a locksmith to force access.
This means that if someone objects and tells you that you can’t come in, you must stop what you’re doing.
Forfeiture is best done late at night or before 6 a.m. when you know the property is closed and unoccupied.
It should be noted that Forfeiture cannot be used for a property that is partly residential and partly commercial, it is only applicable for commercial properties.
Forfeiture By Court Proceedings
A landlord might also terminate the lease by filing a court action to reclaim possession. If the court issues a possession order, the tenancy is considered to have ended on the date the tenant was served with the proceedings. Court processes are typically more costly and time-consuming than forfeiture by peaceful re-entry.
Relief From Forfeiture
A tenant, subtenant, or lender can petition the court for relief from forfeiture in order to keep the tenancy going. However, the Court can set conditions, such as requiring the tenant to pay any rent arrears or correct the breach before the case is heard.
Supervised Re Entry
It’s impossible to just hand over the key and let the tenants take their belongings. This is due to the possibility that they will just reoccupy the territory and take peaceful rule. You’d have to either restart the forfeiture procedure or go to court.
The solution is to hire Shergroup to supervise their entry and removal of their belongings. Legal and other expenses are usually the responsibility of the renter under the lease; therefore, you can usually ask the tenant to pay these.
The goal of monitored access is to ensure that a bailiff is there at all times to maintain possession of the property, preventing the ex-tenant from reclaiming vacant possession.
Breaking in and entering is a criminal offence but the police won’t be able to help you much as per them it’s a civil matter and they’d refuse to get involved. So, if you fear tenants’ break in post forfeiture and eviction you can hire security professionals like Shergroup to help you secure your property. You can hire a security guard to monitor your property 24×7 or you can also have remote security solutions installed at the property like CCTV.
Summing-up
One of the most powerful tools in a landlord’s inventory for dealing with rent arrears and other contract violations is lease forfeiture. It is quick, inexpensive, and almost usually produces the desired effects.
There are a few stumbling blocks, so having solid legal and enforcement counsel is critical to ensuring that this works and that nothing goes wrong. This can be tremendously powerful if done correctly, but it can also be very costly if done incorrectly.
Use the services of a Shergroup Enforcement Agent if you need to forfeit your tenant’s commercial lease because of a breach of lease terms. You can use our FREE Review service to check where you stand with your situation | https://shergroup.com/landing-page-uk-forfeiture-of-commercial-lease-service/
Call our business advisors for a free initial discussion and make an informed decision.
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