Forfeiture: A Right To Re-Enter
Forfeiture is often seen as a draconian remedy…
…but the right to re-enter, as it is also known, will be reserved in nearly every lease, commercial or residential.
Forfeiture allows a landlord either to peaceably re-enter a property or to apply to the court to retake possession of their property following a breach of the lease by the tenant. The remedy will not apply to all breaches, only those reserved in the lease and this is usually for non-payment of rent or other monies ‘reserved as rent’ such as service charge. It can be reserved as a remedy for breach of repair covenants too though this is less common in residential leases.
Whilst most landlords will hope that they never need to exercise these rights – in the event that they do it’s important to get it right from the beginning.
Service: Except in the case of non-payment of rent, a notice under section 146 of the Law of Property Act 1925 must be served on the tenant. The notice specifies the breach and allows the tenant time to remedy that breach (If the breach is capable of being remedied) before the landlord can re-enter the property. It is common for a section 146 notice to be served even in the case of non-payment of rent for a ‘belt and braces’ approach.
Notice should be served on the tenants ‘service address’ (check the lease for this) or where none is given at their ‘usual or last known residence’. This may be simple enough to work out if you are renting a residential property and the tenant is residing in it but what if its an individual renting a commercial property to operate a business from? Or a company renting premises that has left without making formal arrangements to terminate the lease?
Case law suggests that it is not enough to believe somewhere to be the ‘usual or last known residence’ you need actual knowledge and will need to get some evidence too. The principle case on the point of ‘residence’ is Relfo Ltd (in Liquidation) v Varsani [2009] which held that you should look to the ‘pattern of life’ when determining someone’s place of residence. Landlords must take reasonable steps to ascertain the defendant’s current residence. Where it can be shown that reasonable steps have been taken but you have been unsuccessful in locating the tenants current address you can serve the notice on the last known residence notwithstanding the knowledge that they are no longer there.
The ‘Civil Procedure Rules’ (or ‘CPR’) are the set of Court rules that govern how claims are brought. If in doubt, an application under CPR 6.15 to serve by an alternative method may be a good idea and in the long run will prevent an application to set aside from the tenant on the basis that service was not valid.
Waiver: Once the section 146 notice has been validly served landlords must be careful not to waive the breach. Waiver of the breach will occur when the landlord has knowledge of the breach but performs a positive act which acknowledges the lease and treats it as continuing, for example, accepting or demanding rent. Knowledge can be imputed from an employee to the landlord which may be sufficient to waiver the breach, though it has been held that constructive knowledge would not be sufficient to waiver a breach. However, once given, whether intentionally or not, a waiver is irrevocable.
These are just two of the pitfalls to avoid when considering exercising a right to re-enter. If you are a landlord seeking help with a difficult tenant or a tenant worried that your landlord might be looking to terminate your lease we can help. Wilson Browne’s specialist teams of commercial property lawyers and commercial litigation lawyers can provide you with practical and easy to understand advice.