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A right to forfeit a tenant’s lease entitles the landlord to take back possession of the property (either by changing the locks or by issuing possession proceedings) and to treat the lease as having come to an end.
This is subject to any rights the tenant may have to seek relief.
However, the ability for the landlord to forfeit the lease is made more complicated by the law in relation to waiver.
Where a landlord is considering forfeiting the lease, where a right has arisen, the landlord must take care that it does not do anything to waive the right.
If the landlord does not elect to forfeit the lease as soon as they are aware of the breach and instead, by its conduct, treats the lease as continuing, the landlord can lose its right to forfeit the lease.
This is known as waiver.
For a landlord to waive its right, there must:
- Be knowledge of the breach; and
- Be an unequivocal recognition or act of the continuation of the lease; and
- Communication to the tenant of the unequivocal recognition or act.
What constitutes knowledge of the breach?
This is an objective test and essentially means that the landlord must have knowledge of the basic facts that, in law, amount to a breach of covenant.
If the landlord suspects there has been a breach of the lease, then they must take steps to establish if that is the case.
If the landlord fails to do this, it will be assumed that he had knowledge of the breach.
A landlord’s employee or agent can also acquire knowledge, and that may also be sufficient to waive the right to forfeit the lease.
The burden of proof is on the tenant to show that the landlord had knowledge of the breach at the time the election was made.
What is an unequivocal recognition or act of the continuation of the lease?
Again, this is an objective test. If the landlord, by his own words or actions, demonstrates to the tenant that he has elected to treat the lease as continuing, then they would automatically waive the right to forfeit the lease.
For example, if the tenant was in arrears of rent and the landlord then went on to demand or accept the rent, this would be deemed as enough to automatically waive the right to forfeit.
What is communication to the tenant of the unequivocal recognition or act?
If the landlord does not communicate the act recognising the lease as continuing to the tenant, then there will be no waiver.
The understanding or belief of the tenant is irrelevant.
What actions may constitute a waiver of the right to forfeit?
- Continuing to accept rent after the right to forfeit has arisen;
- Chasing the tenant for overdue rent;
- Sending rent demands or other notices pursuant to the lease;
- Discussing other aspects of the lease with the tenant.
However, note that there are continuing and once and for all breaches of the lease.
Where the tenant’s breach is a “continuing breach”, a fresh right will accrue each day the breach continues.
So, if a landlord does waive the right to forfeit the lease in the circumstances of a continuing breach, the landlord can wait for the right to occur again.
In the case of a “once and for all” breach, the right will be lost if the landlord waives its right to forfeit.
Forfeiture is not a straightforward area of law, and landlords should consider taking legal advice well in advance of exercising their right to forfeit to ensure the right is preserved and carried out legally.