Forfeiture of Lease

How to guide

What is forfeiture of lease ?

Forfeiture occurs when the landlord exercises their right to regain peaceable possession against the wishes of the tenant.

This is usually where the tenant has breached a condition of the lease or has breached a covenant. The forfeiture is usually undertaken by a Bailiff (Certificated Enforcement Agent) who enters the property peaceably and takes vacant possession of the property.

Forfeiture is a contractual right under the lease which is a right preserved under Section 24 (2) of the Landlord and Tenant Act 1954.

Peaceable possession under the terms of most lease’s is gained by the landlord’s bailiff entering peaceably on ANY part of the land, which includes any outside compound.

Uses of Forfeiture

Forfeiture of Lease is a good tool if you can’t execute Commercial Rent Arrears Recovery (CRAR) because the Bailiff (Certificated Enforcement Agent) can’t gain entry to the property. It can also be used where there are little or no goods to seize, or the goods on the site all belong to third parties.

At present, a landlord can forfeit a tenancy on several grounds depending upon the wording in the lease. The most common is none payment of rent. Other reasons include:

  • Where the tenant breaches the terms of the tenancy.
  • Insolvency where the tenant is made bankrupt, goes into liquidation or there is an insolvency arrangement such as an administration or the appointment of a receiver.
  • Improper use of the property.
  • Change of use without permission.
  • Sub Letting.
  • Nuisance behaviour or excessive noise.

The landlord can make a claim for damages for these breaches, but the landlord may also wish to regain possession of his property.

The landlord can only take action to forfeit the tenancy if the tenancy contains a “forfeiture clause”.

The forfeiture clause allows the landlord’s Bailiff (Certificated Enforcement Agent) to “re-enter” the premises following a breach.

The forfeiture clause in the lease would normally say something like “if the rent remains unpaid for a period of 21 days then the landlord may peaceably re-enter and forfeit the lease”.

Depending upon what the breach is for the landlord may or may not have to first serve the appropriate notice under Section 146 of the Law of Property Act 1925.

Non-payment of rent

Commercial Rent now Overdue

If the breach of the lease is for non-payment of rent and the landlord has not done anything to waive the breach, then usually the landlord can forfeit the lease without giving any notice.

Non-payment is usually classed as being so bad that the landlord would not wish to continue with the lease.

The landlord must make sure that nothing is said or done to waive their right to forfeit the lease.

A Waiver may be construed if the landlord, his Bailiff (Certificated Enforcement Agent) or managing agent does anything that acknowledges that the lease is continuing, such as:

  • sending the bailiff to execute a CRAR procedure
  • agree an instalment plan
  • issue legal proceedings

If this has occurred, then the landlord should wait until the period of rent is due then forfeit for that month / quarter rent.

How to effect Forfeiture of Lease

A landlord can re-enter the premises and forfeit the lease in one of 2 ways. This will be by peaceable re-entry or via court proceedings.

Peaceable Re-Entry

By instructing a Bailiff / Certificated Enforcement Agent such as Quality Bailiffs to physically re-enter the premises.

The re-entry must be peaceable. If any violence is threatened or used, the landlord and the Bailiff (Certificated Enforcement Agent) may commit a criminal offence. This is under section 6 of the Criminal Law Act 1977.

CRAR notice

You may only take Peaceable Possession by forcing an entry with a locksmith.

This means that if any Person is present to say they object you can’t come in, then YOU MUST abandon the action.

Forfeiture is best done when you know the property is closed and empty; late at night or before 6am.

Not to be used on Mixed property

This method cannot be used if the premises include a residential element and there is someone in residence.

In Pirabakaran v Patel 2006, the Court of Appeal clarified the position on whether commercial property can be re-entered when there is mixed use such as a flat above a shop used by the tenant. A similar case was also brought under Tan –v- Sitkowski [2007] EWCA.

See full article about Forfeiture of mixed use property.

Forfeiture by Court Proceedings

A landlord can also forfeit the lease by commencing Court proceedings to obtain possession.

If the Court makes an order for possession the tenancy is treated as coming to an end on the date when the proceedings were served on the tenant.

Court proceedings tend to be expensive and take much longer than forfeiture by peaceable re-entry.

The Royal Court of Justice

Relief from Forfeiture

A tenant, sub-tenant or a lender can apply to the Court for relief from forfeiture to allow the tenancy to continue. In practice however the Court can impose conditions, which might require the tenant to pay any rent arrears or remedy the breach before this is heard.

Goods Inside

If a tenant is still in occupation, then they still own the goods inside. The goods inside are covered by Torts (Interference with Goods) Act 1977.

This puts the landlord in the category of an Involuntary Bailee who through no fault of their own end up being responsible for these goods until they are returned to the rightful owner.

If another person i.e. the landlord or their agent sells or disposes of those goods then the tenant can sue them for conversion, trespass or negligence.

There are a few courses of action a landlord can take and it would always be best to take legal advice from a suitably qualified person.

Torts Notice

One way is to allow the tenant to remove their goods therefore removing the problem.

A Torts inventory should be completed by a qualified Bailiff and then a Torts notice should be posted on the door and served in the prescribed manner giving the tenant at least 14 days notice to remove their belongings.

If they ask for this access within the 14 days then they should be given supervised access to collect their goods.

If they fail to apply to remove their goods within this time then subject to legal advice the landlord can dispose of them and keep account of what happened to them.

Quality Bailiffs can help with this with our Torts service where we draw up the notices, do the inventory, serve the notices, liaise with the tenant and allow supervised access to remove possessions. We can also liaise with contractors to arrange for clearance of goods to be taken to auction.

Supervised re Entry

Tenants cannot be simply given the key and allowed access to remove their belongings.

This is because they could simply re-occupy and take peaceable possession themselves.

You would then have to start the forfeiture procedure over again or go through the court.

The solution is to hire Quality Bailiffs to supervise their entry and removal of possessions. Usually you can get the tenant to pay as legal and other expenses are usually the tenants responsibility under the lease.

The purpose of supervised access is to ensure a bailiff remains on the property at all times keeping possession, therefore not giving the ex-tenant chance to claim vacant possession again.

Sometimes tenants come back

These days in about 20% of cases tenants break back into the property therefore securing peaceable re-entry themselves.

On some occasions the Police will treat this as the criminal offence of “breaking and entering”. However more and more the Police are saying this is a civil matter and refusing to get involved.

The only solution we have found that seems to work in 90% of cases is when the client arranges for a security officer presence in the property for the first 24/48 hours. This seems to take the sting out of the tail.

With security present the debtor cannot break in without being arrested for breaking and entering. The tenant does not know how long the occupation is going to last. The tenant is usually then forced to negotiate or to at least calm down and review his options. This gives the landlord time to arrange other security measures such as shutters or alarms.

Covid 19 and the Coronavirus Act 2020

During the pandemic under section 82 of the Coronavirus Act 2020, a moratorium was placed on landlords using forfeiture from 26th March 2020 until 30th September 2020.

Landlords lost their right to use forfeiture to keep control of rent arrears. This caused many commercial landlords to suffer from tenants who had the money but would not pay.

The government also extended the number of days rent that must become due before CRAR is exercised from 7 to 189 days, which is another blow to landlords.

Conclusion

Forfeiture of lease is one of the most important weapons in a landlord’s arsenal for dealing with rent arrears and other breaches of the lease.

It is quick, cost effective and nearly always gets the results you want.

There are a few pitfalls and getting good legal and enforcement advice is very important so that this works and things don’t go wrong. If done right this is very powerful but if done wrong could cost you dearly.

Author
Andy Coates MABI FCEAA
CEO Quality Bailiffs
(Level 4 Certificate High Court Enforcement)

Here to Help

Quality Bailiffs has over twenty-five years of experience in completing Possessions, High Court Enforcement, seizure, removal, and the sale of goods especially in the commercial rent sector.

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Disclaimer

This article does not constitute receiving professional advice legal or otherwise. It is meant for educational purposes. All information is provided in good faith and is used at the user’s own risk. Enforcement Bailiffs Ltd, t/a Quality Bailiffs, Frank G Whitworth, Derby Legal Services, or it’s employees, are not qualified or insured to give legal advice. All clients should satisfy themselves of their own legal position before using or proceeding with any of the suggestions, strategies or procedures contained in this article, and before instructing us.