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If you need legal advice regarding restrictive covenants or forfeiture of lease, please contact our Property Litigation team on:
01619414000
Forfeiture of a lease is a useful right for a landlord; however, a landlord should exercise caution and seek legal advice as the tenant can apply for relief from forfeiture.
A lease will include tenants' covenants, amongst others, to pay the sums due under the lease (such as rent, service charge and insurance), to keep the property to a certain level of repair and condition, and not to assign or sub-let the property without the landlord's consent.
If the tenant breaches the covenants, the landlord may wish to re-enter the property and end the lease.
The lease may also allow the landlord to re-enter the property in other circumstances, such as when the tenant suffers an event of insolvency.
Where a landlord seeks to end a lease by re-entering the property following a breach of covenant by the tenant, the tenant can apply to the court for relief to have the forfeiture set aside.
Relief from forfeiture is a discretionary equitable remedy, and the court will look at whether the granting of relief will put the landlord and the tenant in the position they would have been in had there been no forfeiture.
If relief is granted, the lease will be reinstated as if no forfeiture has occurred.
Non-payment of rent
Where the lease has been forfeited for non-payment of rent, the tenant must pay the outstanding rent and legal fees to obtain relief.
The court will not automatically grant relief, and the court will take into account various factors in deciding whether or not to grant relief.
The general rule is that because forfeiture is merely security for the rent if the rent and costs of forfeiting the lease are paid, the court will ordinarily grant relief.
The court will take into account the following:
- Whether or not the tenant delayed in making the application;
- Whether or not the landlord has since renovated the property; or
- Whether the landlord has granted a new lease.
If the landlord has now altered their position since carrying out the forfeiture, any delay on its own is unlikely to mean that the relief is refused, but if the landlord, acting reasonably, has altered their position by granting a new lease, the court may be unwilling to grant relief.
Breach of covenant
If a landlord forfeits for breach other than non-payment of rent, they must have served a notice under Section 146 of the Law of Property Act 1925.
There are no fixed rules about whether or not relief will be granted and, if so, on what terms.
If the forfeiture has been claimed for any other breach of covenant than non-payment of rent, the tenant will need to either remedy the breach or pay compensation for breaches that cannot be remedied.
Subtenants and mortgagees
Forfeiture of a lease is an action by the landlord which has the effect of terminating any underlease.
However, the subtenant, and any mortgagee, will have the right to apply for relief from forfeiture.
Who can apply for relief?
The following persons can apply for relief:
- Any person to whom the lease was vested immediately before the forfeiture (this does not include former tenants);
- If there are joint tenants, both must apply for relief, as relief cannot be granted to just one;
- Relief also applies to the agreements for leases where the tenant is entitled to the grant of the lease; and
- As referred to above, underlessees and mortgagees.