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Forfeiture

Most commercial leases contain a forfeiture clause which entitles the landlord to terminate the lease early in certain instances, usually where the tenant have breached the terms of the lease or becomes insolvent.

There are two methods of effecting forfeiture: by peaceable re-entry to the property (i.e. by changing the locks) or by commencing court proceedings for possession of the property.

This can be a powerful tool for a landlord as the fact that a tenancy is protected under the Landlord and Tenant Act 1954 does not trump the ability to forfeit a lease. However, the right to forfeit is subject to various other statutory and common law restrictions including that a landlord cannot enforce a right to forfeit for breach of a tenant covenant, other than in certain cases breaches for non-payment of rent, unless it has first served a notice under s.146 of the Law of Property Act 1925, giving the tenant a reasonable time to remedy the breach.

Landlords also need to ensure they do not “waive” the right to forfeit, which occurs where the landlord has knowledge of the tenant's breach, performs an unequivocal act which recognises the lease as continuing to exist, and communicates that act to the tenant.

We regularly advise both landlords seeking to forfeit a lease and tenants facing forfeiture.

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