Remedies

Forfeiture is a process by which a landlord can seek to reclaim possession of a property. In simple terms, it is the result of a breach of the terms of the tenancy, enabling the landlord to assert that it is entitled to regard the tenancy as being at an end (that is, that it is forfeited and no longer exists). Since this is a process by which a tenancy comes to an end, the landlord is entitled to sue on the covenants that come into effect at the end of the term, for example, to yield up the property in good repair.

Once the landlord initiates the forfeiture process it cannot change its mind, so it needs to consider the consequences extremely carefully. Although some tenants may carry out the works required, this will not always be the case and the landlord will achieve possession (perhaps whether it wants it or not) where the tenant:

• does not do the work required (although the landlord could still claim damages);
• does not seek relief from forfeiture (see below); or
• applies for but is not granted relief.

Possession of the property may prove onerous, with the landlord becoming liable for the rates on it, for example, and also suffering a rental void if the property cannot be quickly re-let. Moreover, during the forfeiture process the landlord may be unable to enforce or operate the covenants in the lease.

Forfeiture is a legal procedure so it is essential that legal advice is sought and that the process is handled by solicitors.

The forfeiture process

To be able to initiate the forfeiture process, certain matters should be considered:

• Is there a right to forfeit? Unless there is a provision allowing the landlord to re-enter the premises for breach of covenant, forfeiture cannot be effected. Most leases contain such a right. In very limited cases, such a right might be implied in the terms of a tenancy.
• Is there a breach? Unless there is a breach of the covenants concerning the condition of the property, there is no right to forfeit and any attempt to do so will be unlawful and will expose the landlord to a claim by the tenant for damages for any disturbance or losses suffered.
• Has the right to forfeit been lost or waived? As forfeiture operates to bring the tenancy to an end, the landlord and tenant relationship will also be at an end if forfeiture is effected. Therefore, if the landlord acts in a manner that can only be consistent with the continued existence of that relationship (for example where a landlord is aware of a breach that could rise to forfeiture but nevertheless continues to accept or demand rent), it follows that the tenancy cannot be at an end.
  Breaches are classified as either ‘continuing’ or ‘one-off’. Where there is a continuing breach (such as a breach of the repairing covenant) then a new breach is deemed to occur every day. Thus, the demand or acceptance of rent will not waive the right to forfeit provided that the breach remains in existence or becomes worse. In the case of one-off breaches (such as carrying out alterations contrary to the terms of the lease, or the failure to decorate by a particular date), if there was a right to forfeit, the landlord can more easily lose or waive the right to forfeit. Consequently, in cases of one-off- breaches, the cautious landlord will immediately stop demanding and collecting rent or otherwise dealing with the tenant under the lease until it has consulted its lawyers and carefully considered its position and the action it might take.
• Section 146 notices Section 146 of the Law of Property Act 1925 sets out that the right of re-entry or forfeiture is only enforceable if the landlord has served notice and the tenant has subsequently failed to comply with the notice in a reasonable time. A section 146 notice is a technical document and should be drafted and served by the landlord’s lawyer. A section 146 notice is not required if the breach complained of is non-payment of rent. Therefore, such a notice will almost always be required in dilapidations cases.
  Where the Leasehold Property (Repairs) Act 1938 applies, the section 146 notice must contain a statement specifying that the Act applies and that the tenant is entitled to serve a counter-notice under the Act within a specified time. If forfeiture is contemplated, the section 146 notice must be served in compliance with section 18(2) of the Landlord and Tenant Act 1927.
  If a section 146 notice is served and the tenant fails to serve counter-notice within the required 28 days, then the landlord can proceed straight to a claim for damages or forfeiture. Therefore, it is important that a tenant in receipt of a section 146 notice acts on it, preferably seeking appropriate legal advice.

(See also Relief from forfeiture under Interim claims against tenants.)

Effecting forfeiture

Assuming that the restrictions on forfeiture have been satisfied, or do not apply, and that a reasonable time has elapsed since the service of the section 146 notice, then the landlord may proceed to forfeit the lease. This may be effected by 1 of 2 methods: peaceable re-entry or court proceedings.

Peaceable re-entry is often evidenced by changing the locks to the property. Forfeiture by peaceable re-entry requires an unequivocal act by the landlord demonstrating that it has exercised its right to forfeit the lease. It can also sometimes be achieved by re-letting the building.

The main advantage of this method is that the forfeiture is immediate and the costs of court proceedings are potentially avoided. However, if the tenant is generally in occupation, the landlord can run the risk of a substantial claim for damages if the tenant is deemed to have been put out of occupation unlawfully. It is unlawful to forfeit otherwise than by court proceedings if the premises, or any part of the premises, are let as a dwelling and someone is lawfully residing in them (section 2 of the Protection from Eviction Act 1977). The landlord should always be encouraged to consult its lawyers before considering peaceable re-entry.

Court proceedings: If there is any doubt about the primary purpose of the letting, or if someone is in residential occupation, making it difficult or unlawful to re-enter peaceably, then court proceedings will be the better or perhaps only method of forfeiting the lease.

Once forfeiture has been effected and the landlord has obtained possession of the property, it is free to deal with the building as it sees fit. However, there may be other persons or organisations with an interest in it, who might be able to seek relief from forfeiture and obtaining a solicitor’s advice in this regard is essential.