Protect the right to Forfeit by Peaceable Re-entry

Forfeiture by peaceable re-entry

The Tribunal, Courts and Enforcement Act 2007 brought in CRAR, Commercial Rent Arrears Recovery, which replaced common law Distraint.

CRAR has been shown is not as effective as Distress. This has already affected the landlord‘s ability to enforce payment of rent arrears and service charges.

I was dismayed to read an article recently that the Law Commission was recommending to the MOJ, Ministry of Justice, that:

• forfeiture should be only done by way of issuing proceedings
• the right to peaceably re-enter be abolished

The rights of Landlords have already been curtailed with CRAR. This proposal will seriously weaken rent enforcement in the commercial property sector if this becomes law.

Forfeiture by peaceable re-entry is a useful tool when

• the property has been illegally sub-let
• there are no goods to exercise CRAR against because they are of little value or subject to third party claims

Some tenants that are already not paying rent will use the period between the issue of the proceedings and the granting of a Possession order as another rent free period.

It is not unusual in London to have long waiting times for possession hearings as it is now, without adding commercial properties into the mix.

During all the waiting time the rent and the service charges are not being paid.

The tenant may then go in to some form of insolvency at the end of this, so then having a further rent free period in the property.

A landlord that recently forfeited by proceedings waited 12 weeks for a hearing and came to us after the County Court bailiffs told him there was a 13 week waiting list before they could evict the tenant.

The new proposals

The following has been proposed:

• Any commercial landlord wanting to terminate after a breach will need to serve a Tenant Default Notice on the tenant giving 7 days notice to remedy the breach. The notice should set out the terms of the breach, any remedial action, and time frame. The notice will also need to be served on mortgagees and sub-tenants who are known to the landlord.
• If the breach is not remedied the landlord may make a Termination Claim to the County Court. This will also need to be served on tenants and mortgagees who are known to the landlord. Once this gets into court the court can then make one of the following orders:
  • a termination order
  • a remedial order
  • an order for sale
  • a transfer order
  • a new tenancy transfer order
  • a joint tenancy adjustment order

Peaceable re-entry along with the rest of forfeiture is abolished and replaced with the Summary Termination Procedure.

Summary Termination Procedure

Under the Summary Termination Procedure the landlord can bring a tenancy to an end without applying to the court. This, however, is not likely to be used very often as it carries risk. The Summary Termination Procedure will only apply where the tenant has “no realistic prospect of resisting a termination claim”.

The landlord will first need to serve a Summary Termination Notice. This notice will bring the tenancy to an end one month after the notice is served, when presumably the landlord may then use peaceable re-entry.

During the one month notice period the tenant, sub-tenant or mortgagee, will be able to apply to the court to discharge the notice.The burden, however, will be on the landlord to show that the tenancy should be terminated.

The final sting in the tail is that for six months after summary termination the tenant, sub-tenant or mortgagee will be able to apply for a Post Termination Order. This will allow the court to grant a new tenancy, or order the payment of compensation, but will not allow it to revive the terminated tenancy.

Not many landlords will risk this procedure. Most will go down the route of court proceedings, overloading a court system that is already over-stretched.

We can help

Quality Bailiffs has over twenty five years of experience in completing possession of property and land, especially in the commercial sector.

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