Forfeiture
In a commercial lease, or business tenancy, forfeiture is a way for the landlord to end the commercial lease if the tenant is in breach of the lease. This is usually for breaching terms explicit within the lease, which are incapable of remedy. Once the landlord does this, the lease is, legally, at an end.
The two common methods of forfeiting a lease is by issuing forfeiture proceedings at Court and obtaining a court order; or peaceable re-entry, where the landlord takes back possession of the property by changing the locks. The courts are generally reluctant to make an order to forfeit a lease and there are many pitfalls with peaceable re-entry that landlords and tenants will require legal advice on before making a decision on what course of action to take.
Mercantile Barristers have expertise in providing advice and representation to landlords and tenants in forfeiture disputes. Our barristers are able to assist by providing pre-action advice on forfeiture in general and, if necessary assisting you to bring or defend a forfeiture claim through the courts should settlement by mediation or other alternative dispute resolution be unsuccessful.
Section 146 of the Law and Property Act 1925
Before forfeiture proceedings commence, a landlord must consider whether a lease allows forfeiture; if there is a breach pursuant to the lease; and whether the breach is capable of remedy, i.e. can the tenant make the breach right. For example, a tenant’s repairing obligations in a commercial lease can be made good, whereas illegal use of the property, or illegal subletting may not be. It is important that landlord’s receive expert legal advice to determine if the breaches they allege are irremediable.
If the breach is remediable, the landlord must serve a notice pursuant to Section 146 of the Law and Property Act 1925 upon the tenant. The Section 146 Notice explains the nature of the breach; states the remedial action the tenant must take; as well as the landlord’s entitlement to damages for the breach.
Mercantile Barristers have expertise in providing advice and representation to landlords and tenants in Section 146 Notice disputes. Our barristers are able to assist by providing advice to landlords as to whether there is a breach of a commercial lease and whether it is remediable; or a tenant in the time they may be permitted to remedy an alleged breach and serve a counter notice. Our barristers also have experiencing in representing landlords and draft s.146 Notices and tenants respond to s.146 Notices.
Rent Arrears; Court Orders and Peaceable re-entry
As a general rule, non-payment of rent does not require a s.146 Notice from the landlord. This means that when there are rent arrears from the tenant of commercial property, the landlord is likely to seek a court order to forfeit the lease; or peaceable re-entry.
Peaceable re-entry occurs when the landlord enters the premises, changes the locks and leaves physical notice that the lease has been terminated on that date. However, it is unlawful for a landlord to re-enter the property if there is someone present who objects to the forfeiture, hence the ‘peaceable’ nature of the re-entry. There are also other rules that landlords must consider if they decide to re-enter the property, which requires expert legal advice, before taking any course of action.
Mercantile Barristers have expertise in providing advice and representation to landlords and tenants in applications to the court for a court order; or if a landlord chooses to peaceably re-enter commercial premises. Our barristers are able to assist by providing advice to landlords as to whether a court order or peaceable re-entry is appropriate according to their particular case and, if necessary assisting landlords bringing a forfeiture claim through the courts should settlement by mediation or other alternative dispute resolution be unsuccessful.
Residential or Commercial Forfeiture?
Forfeiture only applies to commercial property. For residential property, a landlord cannot use peaceably re-entry, unless there is evidence that the tenant has vacated the premises and does not intend to return. Should a residential landlord want to take back their premises pursuant to an Assured Shorthold Tenancy, or similar agreement, it is advisable to seek the advice of our Landlord and Tenant Dispute Barristers to recover possession of residential property through court proceedings.
Relief from Forfeiture
A tenant may be able to successfully apply to their local County Court or the High Court for an order to overturn the forfeiture; be returned to the property; and have the lease reinstated, as if the forfeiture did not happen.
Applications for relief by the tenant can begin upon the landlord applying to the court for an order; or peaceable re-entry. If forfeiture has occurred and the parties manage to reconcile their differences with an agreement for the commercial lease to continue, relief can only be awarded by a court. Although the court has a broad discretion to award relief from forfeiture, it is usually recommended for a tenant to make the application as soon as possible and at the very latest, within six months of forfeiture.
We also act for tenants in protecting against and applications for relief from forfeiture. Our work advising both landlords and tenants means we understand the position of both parties in the dispute, which helps us to advise tenants on how to respond to threats of forfeiture and on the tactics for a successful relief application.
Mercantile Barristers have expertise in providing advice and representation in relief from forfeiture of commercial leases for landlords and tenants, whether they are businesses or individuals. We have particular experience in advising tenants if their has been re-entry in their property by the landlord and how to make an appropriate application to the Court for relief from forfeiture. Once an application for relief from forfeiture is listed, our property litigation barristers and can provide practical, specialist advice and representation to obtain relief and restore you to your commercial property. We also have experience in representing landlords who are in receipt of a relief from forfeiture application. If you require advice contact our Property Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
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In the consultation the barrister will assess your legal position, devise a legal strategy, and give you appropriate advice on the necessary next steps to achieve your objective.
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