Relief from Forfeiture of Commercial Leases
With the worst effects of Covid-19 pandemic hopefully “out of the way”, commercial tenants are increasingly finding themselves victim to landlords seeking to forfeit their lease, often motivated by a desire to increase the rental income.
As the moratorium relating to forfeiture has now ended, many landlords appear to be taking the opportunity to insist on rental arrears – perhaps accrued during lockdown – being cleared in full. If not cleared, they change the locks and thereby forfeit the lease.
Once a landlord has forfeited the lease, a landlord can then remarket the property and look for a higher rent. Although this may appear to be unscrupulous, it is nevertheless perfectly legal.
Commercial tenants must remember, that if there are rental arears, subject to what is in the Lease, a landlord can change the locks and forfeit the lease with little notice. However, tenants can and should make an application to the court for relief from forfeiture.
An application for relief from forfeiture must be made within six months of the forfeiture taking place. This six-month rule is not “fixed in stone”, in so far as a tenant can make an application if more than six months have passed. It is just that the Court could consider such an application to have been made ‘out of time’ unless, there is good evidence to support the reason for the delay.
There are two points that any tenant wishing to seek relief from forfeiture should consider, namely:
- If there are rental areas, then they should be cleared in full. A court is unlikely to grant relief from forfeiture if the tenant is unable to clear the arrears.
- In most cases, the tenant will have to pay the landlords costs of the proceedings.
Notwithstanding clearing the arrears in full, and paying the landlord’s costs, a landlord may still object to an application for relief if there has been historic late payment of rent and other charges, and breaches of the lease.
In summary, Tenants who face forfeiture do have a remedy, and the Court will, in most cases grant relief, provided the aforementioned conditions are met.
If a landlord forfeits the lease, then the lease comes to an end at that point in time.
From the date of forfeiture, a landlord is not entitled to any further rent or any other payment under the terms of the lease. Nor is the landlord entitled to hold the tenant to any on-going covenant in the lease.
In summary, tenants of commercial premises, and in particular good tenants, can take steps to protect their business and seek relief from forfeiture should it arise, but such applications must be made quickly.* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*