Commercial landlords are now once again able to forfeit leases on commercial properties due to non-payment of rent. There was a moratorium pause on this matter under the Coronavirus Act 2020, but this has now been lifted and commercial landlords are once again able to seek legal advice to forfeit leases. There are still, however, some omitting circumstances when rent due is classed as ‘protected rent’ under the Commercial Rent (Coronavirus) Act 2022.
Our commercial litigation experts have provided an overview below for commercial property landlords explaining the legal options and processes available to them.
What are My Options?
Review the Commercial Lease for the Property
When initially agreeing the rent/lease of the commercial property, both the landlord and tenant will have signed a commercial property lease. Landlords need to check this legal document to establish the exact terms of the relevant sections regarding forfeiture of commercial lease.
The majority of commercial property leases will include the right of re-entry, so if after a lease termination notice the rent has still not been paid, the landlord can take further action.
Establish when a commercial lease can be forfeited
In accordance with the point above, a modern commercial lease will state the commercial landlord has the right in accordance with the forfeiture clause to re-enter the commercial property if the rent is unpaid for a defined period.
Once a decision has been made by the landlord to forfeit the lease, they should avoid correspondence with the tenant to mitigate the risk of waiving their right to forfeit.
Apply to Court or Undertake Peaceable Re-Entry
If a commercial tenant owes rent, the Landlord has the option to ‘peaceably’ take the premises back and re-let them.
Before undertaking peaceable re-entry, the landlord must take into consideration factors such as the time of day/night they will seek access, if there are keys available and if the tenant is likely to be in the property.
If the tenant is in the commercial property and the landlord encounters any resistance, then they should immediately withdraw.
A landlord should consider employing the services of a bailiff to assist with the peaceable re-entry.
If, when the landlord gains access, the property is still furnished with the tenant’s belongings, it is strongly recommended that a comprehensive inventory (including photographs) is made. The tenant should then be contacted and advised to arrange a convenient time and date to collect these and the consequences they will face should they not do so.
Court proceedings will take longer to enact, but are often more appropriate when there is a dispute regarding the amount of money owed.
If you have any reason to believe that the tenant is living in the commercial premises, peaceful re-entry should not be used and a Court order will should be applied for.
Relief from Forfeiture
Even after the commercial landlord has re-gained access to the property, the tenant still has the right to apply through the court for relief from forfeiture to reinstate the lease.
If the tenant has promptly applied and paid the money, the courts do have (and often will) grant discretion to the tenant. The tenant will usually have up to six months to apply for relief. In order to obtain relief, the tenant will have to repay all outstanding rent and the landlord’s legal costs.
If the premises have been re-let before the relief application is made, relief is very unlikely to be granted.
Other Considerations
When forfeiting a commercial property lease, the landlord is cancelling all of the future liabilities of the lease and if they do not have new tenants to move in they could be responsible for paying the empty property rates. If the tenant has previously complied with the lease’s terms and has only recently started to miss rental payments, the landlord should consider the position carefully before forfeiting, especially if there is no alternative tenant showing interest in acquiring the lease.
Following forfeiture, the landlord will need to comply with the Torts (Interference with Goods) Act 1977 before disposing of any belongings which the tenant has not taken. This will require the service of a specific notice.
Find Help with Howells
Our specialist litigation team work with commercial property landlords and residential property landlords providing legal advice and representation to assist with related tenant and property matters. For specific information, simply get in touch.
