Forfeiture of Lease Solicitors

Forfeiture of a Commercial Lease: Legal Advice

Forfeiture is the landlord's right to bring a lease to an end prematurely when the tenant has breached a lease obligation. It is one of the most powerful remedies available to a commercial landlord, but also one of the most technically complex. A mistake in the forfeiture process — whether failing to serve a valid section 146 notice, waiving the right to forfeit, or forfeiting unlawfully — can expose the landlord to significant liability and destroy their position.

Legal Merchant's specialist solicitors advise landlords on exercising the right of forfeiture correctly and tenants on applying for relief from forfeiture where a lease has been, or is about to be, forfeited.

When Can a Landlord Forfeit?

The right to forfeit must be expressly reserved in the lease (as it is in virtually all commercial leases) through a forfeiture clause (also called a re-entry clause). The most common grounds for forfeiture are:

• Non-payment of rent — typically when rent is more than 14–21 days overdue (the period specified in the lease's forfeiture clause)
• Breach of any other lease covenant — including repairing obligations, alterations without consent, unauthorised subletting or assignment, breach of user covenant
• Tenant insolvency — many leases contain a forfeiture clause triggered by the tenant entering administration, liquidation or bankruptcy (though insolvency moratoriums may restrict enforcement)

Methods of Forfeiture

1. Peaceable Re-Entry

For non-payment of rent (and, in some cases, other breaches where no section 146 notice is required), a landlord can forfeit by peaceable re-entry — physically re-entering the premises and changing the locks. This can only lawfully be done:

• When the premises are unoccupied at the time of re-entry (to avoid committing a criminal offence under the Criminal Law Act 1977)
• Without using or threatening violence
• Only where the forfeiture clause is triggered and has not been waived

Re-entry without a court order carries risks: if it is unlawful, the landlord may face claims for trespass, damages and an injunction requiring them to allow the tenant back in. Our solicitors advise on whether peaceable re-entry is appropriate in the specific circumstances.

2. Court Proceedings

A landlord can also forfeit by commencing possession proceedings in the County Court or High Court. Court proceedings are generally safer and more appropriate where the premises are occupied, where the right to forfeit may be disputed, or where the landlord also wants to recover arrears in the same proceedings. For breaches other than non-payment of rent, a valid section 146 notice must first be served.

Section 146 Notices

Before forfeiting for any breach other than non-payment of rent, the landlord must serve a notice on the tenant under section 146 of the Law of Property Act 1925. The notice must:

• Specify the breach complained of
• Require the tenant to remedy the breach (if it is capable of remedy)
• Require the tenant to pay compensation in money for the breach (if applicable)

The landlord must then wait a reasonable time for the tenant to remedy the breach before taking action. What is "reasonable" depends on the nature of the breach — a few weeks for a minor breach, longer for major structural repairs. Failing to serve a valid section 146 notice before forfeiting renders the forfeiture unlawful.

Additional protection applies to repairing breaches under the Leasehold Property (Repairs) Act 1938: if the lease has three or more years to run, the landlord cannot take action (forfeit or sue for damages) based on a repairing breach without first obtaining leave of the court.

Waiver of the Right to Forfeit

The right to forfeit is lost (waived) if the landlord, knowing of the breach, does any act that recognises the continuing existence of the lease — most commonly by:

• Demanding or accepting rent that falls due after the date of the breach
• Serving a rent review notice after the breach
• Granting consent to assignment or subletting after the breach
• Distaining or exercising CRAR for rent after the breach

Waiver is one of the most common mistakes landlords make when dealing with tenant breaches. Once waived, the landlord cannot use that particular breach to forfeit — though they can still claim damages. If a continuing breach occurs again, a fresh right to forfeit arises.

Relief from Forfeiture (Tenant's Remedy)

A tenant whose lease is forfeited (or is about to be forfeited) can apply to the court for relief from forfeiture. The court has a broad discretion to grant relief, typically on terms that:

• All arrears of rent, service charges and costs are paid
• Any breach of covenant is remedied
• The landlord's legal costs are paid

Time is critical for tenants seeking relief. Where the landlord has re-entered without court proceedings, an application for relief should be made as soon as possible — delay may result in the court declining to grant relief. Our solicitors act urgently in these situations, including making emergency applications to the court where necessary.

Sub-Tenants and Mortgagees

Forfeiture of a lease also destroys any sub-leases granted by the tenant and any mortgage over the leasehold interest. However, sub-tenants and mortgagees have their own independent right to apply for relief from forfeiture under section 146(4) LPA 1925, and the court can grant a new lease directly to a sub-tenant or mortgagee. Our solicitors advise sub-tenants and lenders on protecting their interests when the headlease is at risk of forfeiture.

Frequently Asked Questions