Forfeiture of a Commercial Lease
Forfeiture of a commercial lease allows a landlord to regain possession of a property following a tenant’s breach of a lease. Possession is gained by ‘peaceful’ re-entry or via court proceedings.
Our specialist commercial property disputes solicitors advise landlords and tenants across the UK on forfeiture of a commercial lease from our offices in Bristol and the surrounding area, in Bedminster, Bishopston, Bristol city centre, Kingswood and Thornbury.
What are the grounds for lease forfeiture?
There are several grounds for which a landlord can forfeit a tenancy, depending on what is included in the lease. These include:
- Unpaid rent
- The tenant has breached the terms of the tenancy
- Damage to the property or premises
- Sub-letting
- Antisocial behaviour
- The tenant is made bankrupt or is insolvent
- Change of use without permission
If the tenant has damaged the property, the landlord can make a commercial lease dilapidation claim. As a landlord, it is a good idea to consider this before claiming forfeiture, as the tenant can remain in the property while the dilapidation claim is ongoing, meaning you will continue to receive income from rent.
Forfeiture clause
A landlord has the right to forfeit if the lease includes a forfeiture clause. Alternatively, in the absence of a forfeiture clause, the right to forfeit may arise where there has been a fundamental breach of a condition of the lease. This will be matter-specific, and you should seek legal advice if you are in this situation.
Forfeiture brings the lease to an immediate end and provides the landlord with possession of the property.
What is the process of forfeiture of a commercial lease?
There are two ways of approaching commercial forfeiture of a lease:
- Peaceable re-entry; and
- Court proceedings.
The landlord may have to give notice under section 146 of the Law of Property Act 1925, depending on what the breach is. Generally, a landlord does not have to give notice for unpaid rent, the most common reason for the forfeiture of a commercial lease.
Peaceable re-entry
Peaceable re-entry means physically entering the property and changing the locks.
It can be tempting for landlords to go ahead and do this upon a breach of the lease, however, it is vital to check you have the right to do so, as failure to comply with the relevant requirements can lead to legal action against you, such as a claim for unlawful eviction and relief from forfeiture.
If you are unsure whether you have the right to re-enter the property, our commercial property litigation solicitors can help. We can review your lease and advise you on the best way of forfeiting the tenancy.
Court proceedings
Forfeiture of a commercial lease via court proceedings is more formal and is where the landlord’s claim for forfeiture is determined by the court. This is often the preferred approach, as the tenant has the opportunity to defend themselves during the proceedings, and the court determines the claim having considered all information.
With peaceable re-entry, the risk is that the landlord’s action is challenged once they have regained possession, and this can cause complications and delays regarding future use of the property.
Court proceedings for forfeiture of a commercial lease do not guarantee a more favourable outcome for the landlord; if the court denies them the right to forfeit the lease, the tenant may be eligible for compensation. The landlord’s action to peaceable re-entry can also be challenged by a tenant. It is worth bearing in mind that the court could also grant relief from forfeiture, allowing the tenant to remain in the property.
Relief from forfeiture
Following the landlord exercising their right to forfeit the lease, a tenant has the right to apply for relief from forfeiture. If relief is granted by the court, the lease will continue as if it had never been forfeited.
The tenant’s prospects of being granted relief from forfeiture will depend on the breach and the individual circumstances of the claim.
How Barcan+Kirby can help
Our commercial property disputes solicitors advise on all aspects of forfeiting a commercial lease, as well as various other aspects of property disputes.
We can help with:
- Reviewing the lease terms, including to check if the landlord is permitted to peacefully re-enter the property
- Advising on whether there are sufficient grounds for forfeiture
- Issuing court proceedings
- Arranging for a possession order to be enforced once granted by the court
- Advising tenants on relief from forfeiture
- Helping tenants with surrendering a commercial lease
Our team acts for both landlords and tenants on a wide range of commercial property matters, providing practical and straightforward advice, and focusing on conflict-free resolutions to commercial property disputes.
Forfeiture of a commercial lease FAQs
To apply for relief from forfeiture, the tenant must submit an application within six months of the forfeiture.
You should instruct a property dispute solicitor to help with the application to ensure that it has your best interests in mind and includes the information the court needs when considering whether to grant relief. A relief from forfeiture application should be approached sensibly and with legal advice.
Yes, a tenant can surrender a commercial lease (ending the lease before it expires) as long as there is mutual agreement with the landlord; landlords are not obligated to accept a lease surrender.
Whilst there is no prescribed notice form, a section 146 notice must contain certain information required by statutory. This includes (but is not limited to):
- Outline of the breach
- Specify what the tenant is required to do or pay to remedy the breach
- Specify how long the tenant has to remedy the breach, providing an exact date/deadline
It is advisable to seek legal advice on the drafting of the notice to ensure it is valid.
If the tenant fails to adhere to the notice, the landlord should seek advice on the appropriate next steps, which will likely include peaceably re-entering the property or applying for court proceedings.
Possibly, but this is dependent on the breach. In this instance, legal advice should be sought before taking action.
Further information
For advice on the forfeiture of a commercial lease, get in touch with our expert Commercial Property Disputes team in Bristol.
Call us on 0117 325 2929 or fill out our online enquiry form and we will be in touch.