Commercial Property: Tenant’s Breach of Lease – Part 1

Where a tenant is in breach of a covenant, a landlord may take steps to terminate the lease, referred to as forfeiture. Forfeiture does not automatically happen upon the tenant’s breach, but rather the landlord must take active steps to forfeit the lease. A well-drafted commercial leases will contain a clause which allows the landlord to forfeit where the tenant has breached a clause in the lease. Common breaches include:

– making alterations without the landlord’s consent
– sub-letting or assigning the lease without the landlord’s consent
– failure to put or keep premises in repair
– illegal/immoral use
– other unauthorised use

The process for forfeiting a lease will depend on whether the breach is for non-payment of rent, or another form of breach. Here we will deal only with the latter. In such a case, a landlord must serve a notice pursuant to Section 146 of the Law of Property Act 1925, prior to forfeiture by peaceable re-entry or court proceedings. The notice must set out specific information and require that the tenant do remedy the breaches complained of (if possible). If the tenant does not remedy the breaches within a reasonable time or they are incapable of remedy then a landlord may proceed to forfeiture. A lease will usually contain a clause which allows the landlord to recover his costs for serving the notice on the tenant.

A landlord’s right to forfeit may also be affected by any act which waives his right. This includes carrying out an act that recognises the continuing existence of the lease such as demanding or accepting rent or arranging an inspection after they have knowledge of the breach. In Part 2 we will consider how a landlord may come to waive his right to forfeit and how to avoid doing so.

Hollie Wright, Solicitor in the Commercial Litigation Team at Mullis & Peake, said:

“With the new year well underway, many commercial landlords are taking the opportunity to carry out inspections of their premises to check that the tenant’s occupation is in good order. Here at Mullis & Peake we have noticed an increase in the number of enquiries from commercial landlords who have, upon inspection, noticed that the tenant may be in breach of some of the lease terms. It is very important that landlords have a clear understanding of their rights where a tenant has breached the lease and the timescale in which they must take steps to avoid waiving any rights they may have.”

Should you have any Commercial Landlord & Tenant issues and require legal advice, please contact Hollie Wright on 01708 784022.