If you are a tenant with a lease on a commercial property and your landlord is trying to remove you from your lease early, then ‘Relief from Forfeiture’ could provide a useful legal tool to attempt to continue your lease and stay in your premises. But what is Relief from Forfeiture, what are your rights, what are your landlord’s rights and what are your options moving forward?
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If you, as a tenant, have breached the terms of your lease, through either the non-payment of rent or by breaching any of its other covenants, then your landlord can seek to end the lease by re-entering the property. This is a legal process and the right of your landlord to do this will be included in most standard commercial leases.
However you, as the tenant, have the right to petition the courts and request Relief from Forfeiture which would overrule the rights of your landlord to end your lease. The court has the discretion to either grant or withhold Relief From Forfeiture. In general if the court believes that you have taken the necessary steps to remedy the breach then it will find in favour of the tenant, however this can sometimes be a complex area of law and we would recommend taking professional advice about your rights and options in these cases.
If your landlord wishes to terminate your lease early and you then wish to apply for Relief from Forfeiture to avoid this, there are a number of steps which must legally be taken.
1. The first steps depend on how you have breached the terms of your lease:
a. If you have built up rent arrears then your landlord has the right to forfeit your lease after a set number of days following the date of non-payment. This amount of time will be set out in your lease, but is commonly 14 or 21 days. In these circumstances your landlord does not legally have to give you any notice prior to forfeiting the lease.
b. If you have broken any of the other covenants of your lease, such as illegally sub-letting part or all of the premises, or making unauthorised alterations to the property, then your landlord must serve you with a Section 146 Notice. This must include the specifics of the breach, whether the breach can be remedied, instructions to the tenant that the remedy must be carried out, and any demands for compensation.
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2. Once forfeiture proceedings have been instigated, your landlord can either issue court proceedings or opt for ‘peaceable re-entry’:
a. Court proceedings can be used if you, as the tenant, have failed to remedy the breach of your lease as set out in the Section 146 Notice and have failed to make any due compensation.
b. Peaceable re-entry is a standard clause in most commercial leases, and usually consists of the landlord re-entering the premises whilst it is vacant (usually during the night or first thing in the morning). Before the re-entry takes place a prominent notice must be placed on the property declaring that a forfeiture has taken place. It is also important to remember that the landlord cannot force entry into the premises as this could be seen as committing a criminal offence.
How to Apply for Relief from Forfeiture
The Section 146 Notice will provide details of how to apply for Relief from Forfeiture. In general we would recommend getting professional advice and assistance in making your claim. There are a number of factors which, if you have adhered to them, will make the court to look more favourably on your claim:
If you have applied for Relief from Forfeiture within 6 months of the landlord effecting forfeiture. This is the statutory time limit imposed by the County Court Act 1984 and the Common Law Procedure Act 1852, although in some cases applications made outside of this timeframe may still be considered.
If you have paid all outstanding arrears of rent and any costs due since the court proceedings were issued.
If any other breach has been fully remedied.
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When Your Landlord Waives Their Right to Forfeit
There are certain circumstances which, if met, mean that your landlord is legally unable to forfeit your lease. These centre on whether your landlord has performed any actions or functions which indicate that they recognise that your lease is still continuing such as:
Contacting you directly to demand the payment of any rent arrears
Accepting any rent payments
Carrying out any works to the property
Communicating with you on any other matter relating to your lease
Granting any type of licence under the terms of the lease
However it is important to note that if your landlord does waive their right to forfeit your lease, this waiver will only be in effect until the next breach occurs e.g. until the next missed rent payment.
Compulsory liquidation and lease forfeiture
We can also advise on the complexities of compulsory liquidation and forfeiture, for which the basis is that if a limited company enters liquidation, the insolvency practitioner can typically apply to the court for Relief from Forfeiture.
If you are faced with being served a forfeiture on your commercial tenancy then we would recommend gaining specialist advice for a commercial lease specialist. The Right to Forfeiture is a complex piece of legislation, with very few statutory rules. Real Business Rescue has specialised in helping company directors who are facing financial difficulties since 1989, so contact us today to arrange your free same day meeting at one of our nationwide offices.
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