As a landlord of commercial premises there are many reasons why you may want to take back possession of your premises, the most common being where your tenant is in breach of their lease terms; such as not paying rent, not keeping the premises in good repair, being a nuisance to neighbours or assigning or subletting the premises without your consent.
Taking back possession of your premises when occupied by a tenant is called ‘forfeiture’. However, you can only forfeit the lease if there is a specific clause in the lease enabling you to do so. It is advisable for all commercial leases to contain such a clause as without it your powers as a landlord are severely restricted.
Where you have the right to forfeit, this can be exercised in one of two ways: you can either use peaceable re-entry, which involves you effectively entering the premises and changing the locks, or you can apply to the court for an order for possession.
Peaceable re-entry is riskier as your tenant could apply to court for ‘relief from forfeiture’, which if granted would allow the tenant to take back possession and claim compensation for losses incurred because of wrongful eviction.
Applying to court for a possession order is usually the preferred route although, as with any court proceedings, it can be costly and lengthy so should only be considered as a last resort.
The route you choose often depends on the reason for the repossession.
Non-payment of rent
For non-payment of rent you are not required to give any notice of your intention to forfeit – you can simply re-enter the premises.
You must not do anything to acknowledge the continuance of the tenancy, such as remind the tenant of any overdue rent, as this may amount to a waiver of your right to forfeit and you must wait until the next rent payment is missed.
It is advisable to leave a notice of repossession on the door of the premises and have a witness to accompany you, such as a locksmith or your solicitor.
Breach of other lease terms
For any other breaches, you must first serve a notice under section 146 of the Law of Property Act 1925 before you can take possession of the premises. The notice must be served by your solicitor on all interested parties, including the tenant, any mortgagee and any subtenant. It must specify the nature of the breach and whether it requires remedial action within a reasonable time or the payment of compensation. If the breach has not been remedied or the compensation paid as required then you can proceed to forfeit the lease.
Breach of the repair condition
There are additional rules that apply for notices relating to breaches of repair. In some cases, you may be obliged to offer the tenant the opportunity to claim statutory protection. If the tenant claims this protection, which they must do within 28 days of receiving a section 146 notice, the landlord must make a preliminary claim for the court’s permission before taking any further action.
This can be avoided if the lease contains a clause which entitles the landlord to enter the premises to remedy any defect of repair and claim any costs incurred back from the tenant as a debt.
The court procedure
The court procedure for forfeiture starts by making an application for possession in the county court. There are standard claim forms that must be completed, which can now be submitted online in some courts. The claim forms must then be served on the tenant, usually by your solicitor, within a strict time-frame. You should always take legal advice on this as it is a complex area of law and mistakes can be costly and delay your repossession.
Tenants’ relief from forfeiture
Your tenant can apply to court for relief from forfeiture if certain conditions are met. The tenant does not have an automatic right, however; this is a discretionary remedy available to the court, but if granted they may be able to continue to occupy the premises under their existing lease.
The tenant should make an application as soon as they receive a section 146 notice because they will be penalised if they are found to have delayed unnecessarily.
Forfeiture is not to be taken lightly as it can be a lengthy process. You should consider alternatives first and whether there would be any impact on sub-tenancies, assignees and mortgagees. If your tenant is in financial difficulties, one possible alternative might be to agree to the tenant surrendering the lease. Advice should be taken before doing this.
If you would like advice on forfeiture or any other commercial property problem, please contact Tony Irving on 01923 650853 or email firstname.lastname@example.org.