Forfeiture
One option possibly open to a landlord is the right to forfeit a commercial lease or re-enter where the tenant is in breach of the commercial lease or on the occurrence of certain events set out in the commercial lease, such as the tenant’s insolvency.
Before taking any steps, the landlord should consider whether it is commercially in its interest to take the property back. It might want to do this if granting a new tenancy on superior or similar terms. However, suppose the market no longer supports the current letting terms, or there will likely be a void period. In that case, it may be in the landlord’s best interests to keep the existing tenancy in place and pursue alternative remedies.
Statute and common law govern the right to forfeit, and therefore the landlord needs to be very careful in its dealings with the tenant and ensure nothing is done to waive that right, such as treating the commercial lease as continuing. It is advisable to cease communications and put a rent stop in place. Still, the specific breach can be considered directly with one of our team who can advise how best to communicate, if at all, with the tenant to avoid such problems.
If the tenant forfeits the commercial lease, the risk is the ousted tenant may still make an application for relief from forfeiture.
Before entering into a new commercial lease, it is advisable to consider the position further and put the former tenant on written notice that they must make an application promptly if they intend to do so.
Do not get caught out by not serving the appropriate notice. For all breaches of covenant (except for the non-payment of rent), the landlord must serve a section 146 notice under the Law of Property Act 1925 requiring the breach(es) to be remedied if they can be remedied.
Again for advice on what would be considered a reasonable period of notice, this will depend on the individual circumstances of the case, and we can advise further. Further statutory obligations arise in relation to breaches of a repair covenant in the lease if the Leasehold Property (Repairs) Act 1938 applies and it is advisable to attach a schedule of dilapidations in some cases to the notice.
Tactically it can be advisable in some cases for a landlord to serve a section 146 notice where a landlord does not actually intend to forfeit the commercial lease, but it can prompt a tenant to remedy the breaches. Further considerations apply to premises let under a long commercial lease.
Self-Help for breach of repair covenants
There are limits to the amount of damages that a landlord can recover for the breach of the tenant’s repair covenants during the term of a commercial lease. So, in some cases, a landlord may enter the property and carry out the works itself if the lease provides for this (known as a “Jervis v Harris” clause).
An advantage of this type of clause in your lease means that the sums expended can be recovered from the tenant as a debt. However, landlords need to be very careful to ensure that the works do not go beyond the specific disrepair. Otherwise they could be liable for trespass if they have no right of re-entry for such additional works. Advice from a surveyor is prudent in such circumstances in conjunction with legal advice.
If you have a tenant in breach of a commercial lease, speak to property litigator, Laura St-Gallay.
Note: This article is not legal advice; it provides information of general interest about current legal issues.