Forfeiture – top tips for commercial landlords

Forfeiture is a subject we regularly advise upon, so we have pulled together our ‘top tips’ for Landlords looking to forfeit their leases:

Do:

• Ensure there is a forfeiture clause in your lease. If the tenant is in arrears of rent, the right to forfeit should be set out clearly in conjunction with the rent clause. If the lease does not include a forfeiture clause, the lease cannot be forfeited, and you will have to explore surrender negotiations instead.
• Consider what type of breach has occurred. Breaches can either be continuing, e.g. breach of a repairing covenant, or they can be ‘once and for all’ breaches, for example failure to pay rent. With a continuing breach, the right of forfeiture will renew each day the breach continues. However, with a ‘once and for all’ breach the right to forfeit will be lost on upon waiver. Should that happen, we can advise upon other ways to deal with the breach.
• Seek advice before you forfeit a lease via peaceable re-entry. A landlord can forfeit a lease by peaceably re-entering the property or via issuing court proceedings. If the property is occupied or the property includes any residential element and the locks are changed, you risk committing a criminal offence, so it is important to seek advice before you proceed.
• Remember that if the tenant has assets you can recover your legal fees and any dilapidations liabilities from the tenant once you have forfeited.

Don’t:

• Risk waiving your right to forfeit the lease. If you think the right to forfeit has arisen – i.e., a tenant has failed to pay their rent – you must not risk doing anything that could waive it such as demanding any more rent. Instead, you should seek legal advice quickly to ensure your position is preserved.
• Forget to consider your options before forfeiting a lease. The act of forfeiture cannot be undone unless a tenant successfully obtains relief, so it is important you put together a strategy first that balances your objectives against cost, time and potential risks.
• Proceed unless you are confident you can relet the premises quickly or you may be exposed to business rates liabilities.

Forfeiture can be a useful tool for landlords, and something which real estate dispute resolution professionals will be able to explore with you and assist you with.