Forfeiture of a Commercial Lease: A Guide For Landlords

Once a breach has been identified, subject to certain restrictions, there are two ways that a lease can be forfeited:

Peaceable re-entry

This is where the landlord physically re-enters the premises and takes back possession of the property. This is usually done by changing the locks.

This can only be used when:

1. The property is solely used for commercial purposes
2. The property is unoccupied at the time of entry
3. Entry is achieved without using any force

It is important, however, that this is done correctly. Peaceable re-entry carries significant legal risk.

If this is carried out incorrectly, then a landlord may be exposed to claims for unlawful eviction or trespass.

Peaceable re‑entry must therefore be approached with caution and with legal advice.

Applying to the court for a possession order

If the tenant is still in occupation or the breach relates to non-rent matters, the landlord will usually need to apply to the court for possession.

The court will consider whether the breach justifies forfeiture and, if necessary, grant a possession order. The court may also consider whether the tenant is entitled to relief (see below).

This is usually the safer and lower-risk option for landlords.

For most breaches, other than non-payment of rent, the landlord must serve a formal notice under Section 146 of the Law of Property Act 1925 before forfeiture.

This notice notifies the tenant of their breach and gives the tenant the opportunity to remedy the issue before the landlord terminates the lease.

The notice must:

1. Specify the breach;
2. Confirm whether the breach is capable of being remedied;
3. Allow the tenant a reasonable time to remedy the breach; and
4. Warn the tenant that the lease may be forfeited if the breach continues.

If a landlord fails to serve a valid Section 146 Notice, the forfeiture may be invalidated.

The landlord must give the tenant time to respond or remedy the breach. This is usually between 14 and 28 days, depending on the type of breach. If the breach is not remedied within this time, the landlord may proceed to enforce the forfeiture.

It is important for landlords to understand what forfeiture involves, the options available to both a landlord and tenant, and the key considerations before taking action.

If you are contemplating forfeiting a commercial lease, you should approach the situation carefully.

As a landlord, you must ensure that you thoroughly review the terms of the lease, keep clear records of any breaches and any steps taken, and seek legal advice where necessary to avoid the risk of claims for unlawful forfeiture.