It is not something many landlords anticipate with much satisfaction but the need to evict a commercial tenant is almost an inevitability at some point or another. The reasons may vary but there are only two main ways of exercising the right to take back possession of a property currently occupied by a tenant. Neither of them apply if landlord and tenant are operating under a contract that lacks a clause permitting forfeiture. Consequently, it is unwise for any commercial landlord to enter into a contract without ensuring it has been drafted to include a forfeiture clause.
Potential reasons for forfeiture
The most likely reason for seeking forfeiture is that the tenant is in breach of the lease terms. Not paying rent is perhaps the most common cause of this but failing to keep the premises in good repair, assigning or subletting without the landlord’s consent, and constituting a nuisance to the property’s neighbours are also potential breaches.
Exercising the right of forfeiture
There are two potential methods:
· Peaceable re-entry. In this situation, after taking legal advice, the landlord, or their agent, enters the property and changes the locks. In some circumstances, such as non-payment of rent, it is permissible to enter the property without notice. In others, the appropriate notice must be served beforehand. It is usually advisable to re-enter the property outside office hours, when it is most likely to be empty. In response, the tenant has the right to make a court application for “relief from forfeiture”. This can result in the tenant being given back possession of the property and being awarded compensation. For these reasons, many landlords may be reluctant to seek peaceable re-entry but it can still often be the most sensible approach.
Note, however, that peaceable re-entry is significantly more complicated if parts of the property are occupied by residential tenants.
· Applying to the court for possession. Most landlords prefer this option but it is important to be aware that it rarely offers a speedy solution and can be expensive.
The consequences of getting forfeiture proceedings wrong can be disastrous for the landlord. As a result, no decision to forfeit a lease should be taken lightly or without seeking specialist legal advice. Moreover, there are certain circumstances in which it pays to be particularly cautious of initiating forfeiture proceedings. For example:
· The state of the property market. Forfeiting a lease almost inevitably means at least a short rental void. In a weak market, it may also result in a property that cannot be re-let or sold. If this happens, the landlord will also be liable for associated financial liabilities, including rates and utilities.
· The risk to the physical state of the property. An empty property is more at risk from squatters and vandalism. It is also at greater risk from suffering damage to its physical structure as defects may not be noticed as quickly as would be the case if the property was occupied.
It is understandable that a landlord faced with a problem commercial tenant might feel unsure whether to initiate forfeiture proceedings, to seek peaceable re-entry or, indeed, to wait it out and do nothing at all. This is where specialist legal advice can really assist in weighing up the risks of the situation at hand and also the potential consequences of the possible responses.
This article was supplied by Prosperity Law LLP.