Landlords Beware
Author(s)Keith Songhurst
Most commercial leases contain a “forfeiture clause” permitting the Landlord, where the tenant breaches the lease, to terminate the lease before the end of the term. However, the law relating to forfeiture is far from straightforward and many pitfalls await the unwary landlord:-
• Unless the breach is non-payment of rent the landlord must serve notice on the tenant specifying the breach and giving him a reasonable time in which to remedy the breach before he can forfeit.
• Forfeiting by changing the locks is risky as the landlord may be committing an offence if force is used and there is somebody in the property at the time.
• If the landlord does anything to recognise the continued existence of the lease between the tenant’s breach and the forfeiture (e.g. demanding or accepting rent) he could waive his right to forfeit, making subsequent forfeiture unlawful and possibly entitling the tenant to damages.
Tenants also have good reason to be concerned about the current law of forfeiture because, as things stand, there is no requirement on the landlord to serve notice before forfeiting for non payment of rent and they can therefore find themselves locked out of commercial premises without warning for accidentally allowing small amounts of rent arrears to accrue. In the hands of the wrong landlord the weapon of forfeiture can undoubtedly be wielded in a rather brutal fashion.
In the face of widespread criticism of the current law, the Law Commission has proposed that forfeiture be abolished and replaced with a new statutory scheme for the termination of tenancies following a breach of covenant by the tenant. Under the new scheme a landlord would be required to serve a termination notice on the tenant in all cases. Should the tenant then fail to remedy the problem, either the landlord or the tenant could apply to court for an order. The court could then make an order terminating the tenancy or, alternatively, giving the tenant a further opportunity to remedy the breach within a specified time.
The proposed reforms should bring welcome simplification and certainty to an unsatisfactory and complicated area of law. At present, however, the Government is yet to confirm when these reforms will be made. In the meantime, landlords and tenants must continue to wrestle with a system which, in the Law Commission’s own words, “is complex, lacks coherence and can lead to injustice”.
Keith Songhurst from Birkett Long Solicitors will be pleased to talk to any landlords or tenants about commercial property issues. He can be contacted on 01245 453823 or email keith.songhurst@birkettlong.co.uk
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